The positive correlation between real interest rates and inflation is best explained by examining
A)the behavior of the government.
B)forces of supply and demand.
C)the behavior of the market.
D)the behavior of central banks.
E)equilibrium in the economic fluctuations model.

Question

Quizplus · Accepted Answer

Central banks have the authority to set real interest rates and control inflation through monetary policy. Therefore, their behavior and actions directly affect the correlation between real interest rates and inflation.

The Positive Correlation Between Real Interest Rates and Inflation Is