The natural rate of interest is a __________ rate that __________ inflationary expectations.

Question

Quizplus · Accepted Answer

The natural rate of interest is a real rate that excludes inflationary expectations. This is because the natural rate refers to the rate that is consistent with the economy being in long-run equilibrium, and inflationary expectations are a short-term phenomenon that can fluctuate. By using the real rate, policymakers can get a better sense of the underlying economic conditions and adjust policy accordingly.

The Natural Rate of Interest Is a __________ Rate That