If Expected Inflation Is Constant and the Nominal Interest Rate

question 92

Multiple Choice

If expected inflation is constant and the nominal interest rate increased 3 percentage points,what would happen to the real interest rate?

• A) It would increase 3 percentage points.
• B) It would increase,but by fewer than 3 percentage points.
• C) It would decrease,but by fewer than 3 percentage points.
• D) It would decrease by 3 percentage points.

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Definitions:

Central Executive

A component of working memory model that is responsible for the control and regulation of cognitive processes.

Hypothetical

Pertains to something that is supposed or assumed to be true or possible for the sake of argument or investigation.

Retrieval

The process of getting information out of memory storage and back into conscious awareness.

Memory Storage

The process of maintaining information over time and across varying conditions, a fundamental aspect of the human cognitive system.