For a Given Nominal Interest Rate, an Unexpectedly Low Inflation

question 88

Multiple Choice

For a given nominal interest rate, an unexpectedly low inflation rate ________ the real interest rate.

• A)increases
• B)decreases
• C)has no impact on
• D)may either increase or decrease

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Definitions:

Domestic Price

The price of a good or service within a country, influenced by local demand and supply conditions, taxes, and costs of production.

Trade Price

The price at which goods are sold between companies before they reach the final consumer, often lower than the retail price.

Normal Good

A normal good is a type of good for which demand increases when income increases, and falls when income decreases but price remains constant.

Domestic Price

The cost of products or services inside the confines of a nation, in contrast to prices for international trade or exports.