People know that the inflation rate will increase from 3 percent to 5 percent. As a result
A) the nominal interest rate falls by 2 percentage points.
B) the nominal interest rate is constant.
C) the nominal interest rate rises by 2 percentage points.
D) the real interest rate rises by 2 percentage points.
C
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Which of the following statements is correct?
a. The interest rate that is usually reported is the interest rate that has been corrected for inflation. b. The supply of, and demand for, loanable funds depend on the real (rather than nominal) interest rate. c. If the nominal interest rate has decreased and the real interest rate has also decreased, then the inflation rate must have decreased as well. d. All of the above are correct.
Figure 15-3
As shown in , if people behave according to rational expectations theory, an increase in the aggregate demand curve from AD1 to AD2 will cause the price level to move
a.
directly from 100 to 105 and then remain at 105.
b.
directly from 100 to 110 and then remain at 110.
c.
from 100 to 105 initially and then eventually move back to 100.
d.
from 100 to 105 initially and then eventually move to 110.