For central bankers to alter the real interest rate by changing the nominal interest rate, which of the following must be true?
A)The rate of inflation has to remain constant
B)Inflation expectations do not change
C)The expected rate of inflation has to change
D)The change in the expected rate of inflation must equal the change in the nominal interest rate

Question

Quizplus · Accepted Answer

Central bankers can alter the real interest rate by changing the nominal interest rate if inflation expectations do not change, as the real interest rate is the nominal rate minus expected inflation.

For Central Bankers to Alter the Real Interest Rate by Changing