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:

Post-Traumatic Stress Disorder

A mental health condition that's triggered by experiencing or witnessing a terrifying event, characterized by flashbacks, nightmares, and severe anxiety.

Generalized Anxiety Disorder

A mental health disorder characterized by persistent and excessive worry about a variety of topics, events, or activities, without specific triggers.

Dissociative Identity Disorder

A psychological condition in which a person exhibits multiple distinct identities or personality states.

Illness Anxiety Disorder

A chronic condition characterized by excessive worry about having a serious illness, despite having little or no medical evidence to support the presence of an actual physical condition.