If Expected Inflation Is Constant and the Nominal Interest Rate

question 92

Multiple Choice

If expected inflation is constant and the nominal interest rate increased 3 percentage points,what would happen to the real interest rate?

• A) It would increase 3 percentage points.
• B) It would increase,but by fewer than 3 percentage points.
• C) It would decrease,but by fewer than 3 percentage points.
• D) It would decrease by 3 percentage points.

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Definitions:

Profit

The financial gain derived from a transaction or the operation of a business after subtracting expenses.

Inter-Entity Transactions

Transactions that occur between two divisions within the same company, often used for the purpose of allocating costs or revenues between those divisions.

NCI Adjustment

Adjustments made to account for the non-controlling interest's share in the equity of a subsidiary.

Profit

The financial benefit realized when revenue generated from business activities exceeds the expenses and costs.