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.

---

Definitions:

Marginal Benefit (MB)

The augmented satisfaction or usefulness obtained by consuming or producing one extra unit of a good or service.

Marginal Cost (MC)

An upsurge in the cumulative cost incurred from the production of one more unit of a product or service.

Marginal Benefit

The boost in satisfaction or utility experienced by a consumer when they consume an additional unit of a specific good or service.

Total Benefit

The complete gain or advantage that an individual, entity, or society receives from consuming a good or service.