If Expected Inflation Is Constant, Then When the Nominal Interest

question 198

Multiple Choice

If expected inflation is constant, then when the nominal interest rate increases, the real interest rate

• A) increases by more than the change in the nominal interest rate.
• B) increases by the change in the nominal interest rate.
• C) decreases by the change in the nominal interest rate.
• D) decreases by more than the change in the nominal interest rate.

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Definitions:

Conditioned Response

A reflex developed through training in response to a stimulus that is typically neutral.

Unconditioned Response

An automatic, natural reaction to a stimulus that occurs without any need for prior learning.

Unconditioned Stimulus

An innate trigger that spontaneously and effortlessly evokes a reaction without the need for previous learning.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, comes to trigger a conditioned response.