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Say That Initially the Nominal Interest Rate Is 6% and Prices

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Say that initially the nominal interest rate is 6% and prices are stable, but the inflation rate the following year rises to 3%. If the real rate of interest is to remain unchanged, the nominal interest rate in the second year must:


Definitions:

Stomach Contractions

The involuntary movements of the stomach muscles that mix and propel contents through the digestive system.

Ghrelin

A hormone produced mainly by the stomach that stimulates appetite and signals hunger to the brain.

Ghrelin

A hormone produced in the stomach that stimulates appetite, promoting the feeling of hunger before meals.

Leptin

A hormone produced by fat cells that helps to regulate body weight by inhibiting hunger and therefore reducing food intake.

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