Inflation Reached Its Peak (Of at Least 14%) in the Late

question 9

Multiple Choice

Inflation reached its peak (of at least 14%) in the late 1970s/early 1980s.If this statement is true,then:

• A) it is certain the real rate of interest was greater than the nominal rate.
• B) it is certain the nominal rate of interest was greater than the real rate.
• C) borrowers would borrow more because, automatically, real rates would fall.
• D) the real rate of interest must have been constant, even if the nominal rate varied because of consumption smoothing.
• E) if higher nominal rates were charged, it would be certain that higher real rates would be received.

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