If Inflation Had Long Been 4% and Was Therefore Expected

question 68

Multiple Choice

If inflation had long been 4% and was therefore expected to continue, then it unexpectedly increased to 7% inflation:

• A)​the real interest rate on loans issued just before the change occurred would decrease by three percentage points.
• B)​the real interest rate on loans issued just before the change occurred would increase by three percentage points.
• C)​the real interest rate on loans issued just before the change occurred would not change.
• D)​none of the above.

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Definitions:

Split Brain

A condition resulting from the severance or lesion of the corpus callosum, leading to impaired communication between the brain's left and right hemispheres.

Epileptic Seizures

Epileptic seizures are sudden, uncontrolled electrical disturbances in the brain that can cause changes in behavior, movements, feelings, and levels of consciousness.

Cortex Wrinkles

The folds and grooves on the surface of the cerebral cortex that increase its surface area, allowing for a greater number of neurons and higher cognitive functions.

Occipital Lobes

The region of the brain located at the back of the head, responsible for processing visual information.