From 1972 to 1974, the Expected Real Interest Rate on Short-Term

question 19

Multiple Choice

From 1972 to 1974, the expected real interest rate on short-term bonds averaged about +2 percent, but the realized real interest rate averaged about −2 percent.The main reason for the difference was that

• A)actual inflation was about 4 percentage points lower than expected inflation.
• B)actual inflation was about 4 percentage points higher than expected inflation.
• C)a monopoly cornered the market on short-term bonds.
• D)nominal rate of interest was zero.

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Definitions:

Collectivization

A process where private lands and enterprises are seized by the state and run by collective organizations, often associated with Soviet agricultural policies.

Nikolai Bukharin

Was a Soviet politician and Marxist theoretician, a prominent figure in the Bolshevik Revolution who later became a victim of Stalin's Great Purge.

French Popular Front

A coalition of leftist parties in France during the 1930s, known for implementing social reforms and labor laws.

1930s

Denotes the decade encompassing the years from 1930 to 1939, marked by the Great Depression, the rise of fascism, and the approach of World War II.