If expected inflation is constant, then when the nominal interest rate falls, the real interest rate
a. falls by more than the change in the nominal interest rate.
b. falls by the change in the nominal interest rate.
c. rises by the change in the nominal interest rate.
d. rises by more than the change in the nominal interest rate.
B
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In the figure above, both Joe and Jill initially produce at point A. If Joe and Jill realize that they each possess a comparative advantage, which outcome can we expect?
A) Joe will specialize in shirts and Jill will specialize in pants. B) Joe will specialize in pants and Jill will specialize in shirts. C) Joe and Jill each will be able to consume more than 2 shirts and 2 pairs of pants. D) Both answers B and C are correct.
Each person goes about her daily business seeking to maximize her own self interests. In doing so, she contributes to the welfare of society at large. This is the idea underlying Adam Smith's "invisible hand."
Indicate whether the statement is true or false
The prisoner's dilemma is a game in which the gains from cooperation are smaller than the rewards from pursuing self-interest
a. True b. False Indicate whether the statement is true or false
Equilibrium in the loanable funds market is initially present at a stable price level (zero inflation) and a nominal (and real) interest rate of 4 percent. If a shift to expansionary monetary policy eventually leads to actual and expected inflation of 6 percent,
a. both the nominal and real interest rates will rise to 10 percent. b. the nominal interest rate will rise to 10 percent, but the real interest rate will remain at 4 percent. c. the real interest rate will rise to 10 percent, but the nominal interest rate will remain at 4 percent. d. both the real and nominal interest rates will remain at 4 percent.