Historically,why Have High Inflation Rates Tended to Be Associated with High

question 37

Multiple Choice

Historically,why have high inflation rates tended to be associated with high nominal interest rates?

• A)Individuals will spend more when they expect their investments to increase in value.
• B)Growth in investment and savings is encouraged when consumers are judged to be overspending.
• C)High inflation leads to a decrease in purchasing power and thus increases the attractiveness of investment over consumption in the short term.
• D)The real interest rate needs to be high enough so that individuals can expect their savings to have greater purchasing power in the future than in the present.
• E)High interest rates mean that savings grow faster,and when people have more money to spend,prices will increase.

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Definitions:

Convergence

The process or phenomenon where two or more separate species evolve similar traits independently, often due to similar environmental pressures.

Divergence

The process by which two or more related species become more different over time, often due to different environments or lifestyles.

Neural Circuit

A functional group of neurons, typically consisting of one or more afferent neurons, one or more interneurons, and one or more efferent neurons.

Schwann Cell

A type of glial cell in the peripheral nervous system which forms the myelin sheath around neuronal axons, enabling faster transmission of electrical signals.