Suppose That the Nominal Interest Rate Increases While the Expected

question 13

Multiple Choice

Suppose that the nominal interest rate increases while the expected inflation rate rises.Given this information,we know with certainty that the real interest rate

• A)will not change.
• B)will fall.
• C)will fall, but only if the increase in the nominal rate is smaller than the increase in expected inflation.
• D)will fall, but only if the increase in the nominal rate is greater than the increase in expected inflation.
• E) none of the above

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