If the nominal interest rate is 5 percent and the rate of inflation is -2.5 percent, then the real interest rate is
a. -7.5 percent.
b. -2.5 percent.
c. 2.5 percent.
d. 7.5 percent.
d
Economics
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To what extent can monetary policy be used to affect output in a fixed exchange rate regime? Explain
What will be an ideal response?
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Given a fixed nominal interest rate on a loan, unanticipated deflation: a. decreases the burden of paying off the loan
b. increases the burden of paying off the loan. c. does not alter the burden of paying off the loan. d. has an indeterminate effect on the burden of paying off the loan.
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