For a Given Real Interest Rate, Which of the Following

question 129

Multiple Choice

For a given real interest rate, which of the following best describes the effects of an increase in inflation?

• A)Inflation makes the real interest rate decrease, which encourages savings.
• B)Inflation makes the real interest rate decrease, which discourages savings.
• C)Inflation makes the real interest rate increase, which encourages savings.
• D)Inflation makes the real interest rate increase, which discourages savings.

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Definitions:

Divergent Thinking

A thought process or method used to generate creative ideas by exploring many possible solutions, characterized by open-ended, spontaneous, non-linear thinking.

Convergent Thinking

A thought process that focuses on arriving at a single, correct solution to a problem by applying logical steps and factual knowledge.

Functional Thinking

A problem-solving approach that focuses on how things work and seeking practical ways to accomplish a given task.

Circular Thinking

A form of reasoning in which the conclusion is pre-assumed in one of the premises, often leading nowhere or to logical fallacies.