If Expected Inflation Is Constant and the Nominal Interest Rate

question 60

Multiple Choice

If expected inflation is constant and the nominal interest rate increased 5 percentage points, what would happen to the real interest rate?

• A)It would increase 5 percentage points.
• B)It would increase, but by less than 5 percentage points.
• C)It would decrease, but by less than 5 percentage points.
• D)It would decrease by 5 percentage points.

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