Suppose that at the target inflation rate of 2.5 percent the nominal interest rate is 4 percent. This means that at the target inflation rate, the central bank wants the real interest rate to equal
A) 6.5 percent.
B) 4.0 percent.
C) 2.5 percent.
D) 1.5 percent.
E) Not enough information is given to answer this question.
Correct Answer:
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