If Expected Inflation Is Constant and the Nominal Interest Rate

question 18

Multiple Choice

If expected inflation is constant and the nominal interest rate decreases by 2 percentage points,then the real interest rate

• A)increases by 2 percentage points.
• B)increases,but by less than 2 percentage points.
• C)decreases,but by less than 2 percentage points.
• D)decreases by 2 percentage points.

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Definitions:

Reductio Ad Absurdum

A logical argument technique where a proposition is disproven by following its implications to an absurd consequence.

Argumentum Ad Hominem

A fallacy in debate that targets a person's character or personal traits in an attempt to discredit their argument, rather than addressing the argument itself.

Market Forces

The various factors, such as supply and demand, that influence the price and availability of goods and services in a market.

Corporate Misbehavior

Describes unethical or illegal actions taken by companies or their representatives.