If the Real Interest Rate Is Expected to Become Negative

question 20

Multiple Choice

If the real interest rate is expected to become negative, then the purchasing power of savings would be ____, as the inflation rate is expected to be ____ the existing nominal interest rate. ​

• A)decreasing; less than
• B)decreasing; greater than
• C)increasing; greater than
• D)increasing; less than

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Definitions:

Proportional

Proportional describes a relationship between two quantities where their ratio remains constant.

Compressed

The state of being pressed into less space or condensed under pressure.

New Pressure

A term referring to the stress or urgency of a situation, or in a scientific context, the change in the force exerted by a fluid per unit area.

Expanded

Increased in volume or size, often by the introduction of air or in response to heat.