If Inflation Had Long Been 7% and Was Therefore Expected

question 136

Multiple Choice

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

Simple Linear Regression

A statistical method for modelling the relationship between a single independent variable and a dependent variable by fitting a linear equation to observed data.

Hypotheses

Proposed explanations or predictions for phenomena or relationships in research that can be tested through experimentation and observation.

Mean Square Error

A measure of the average of the squares of the errors or deviations, indicating the difference between estimator and what is estimated.

Total Sum

The aggregation of all values or observations in a dataset.