When deflation occurs
A) the real interest rate is greater than the nominal interest rate.
B) the nominal interest rate is greater than the real interest rate.
C) the nominal interest rate is equal to the real interest rate and inflation is negative.
D) the nominal interest rate is equal to the real interest rate and inflation is positive.
Answer: A
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A $100 million decrease in government expenditure on goods and services leads to an even larger decrease in aggregate demand because of
A) induced changes in consumption expenditures. B) automatic fiscal policy. C) induced changes in aggregate supply. D) discretionary fiscal policy. E) the reinforcing effect of monetary policy.
In the Keynesian model, a firm's high menu costs cause
A) real-wage rigidity. B) full employment. C) price stickiness. D) efficiency wages.
An increase in government spending might be an example of a ________ policy for the purpose of ________
A) monetary; lowering unemployment B) monetary; reducing inflation C) monetary; increasing saving D) fiscal; reducing inflation E) fiscal; lowering unemployment
The economy's two most important financial markets are
a. the investment market and the saving market. b. the bond market and the stock market. c. banks and the stock market. d. financial markets and financial institutions.