If Inflation Does Not Adjust Rapidly in the Short Run

question 162

Multiple Choice

If inflation does not adjust rapidly in the short run, then when the Federal Reserve increases the nominal interest rate, the real interest rate in the short run will:

• A)increase.
• B)decrease.
• C)not change.
• D)be determined by saving and investment decisions.

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Definitions:

Operant Conditioning

A method of learning that employs rewards and punishments for behavior, through which an association is made between a behavior and a consequence for that behavior.

Ladder

A set of steps or rungs between two vertical bars, used for climbing up or down.

Shaping

A method of behavior modification that involves gradually training an organism to perform a specific behavior by reinforcing successive approximations of the target behavior.

Reinforce

To strengthen a behavior by providing a consequence that increases the likelihood of the behavior being repeated.