Exhibit 27-1
-According to the data in Exhibit 27-1,
A)real interest rates are negatively related to inflation.
B)real interest rates are negatively related to the gap between real and potential GDP.
C)real interest rates and real GDP are positively correlated.
D)the Fed does not follow a monetary policy rule.
E)the nominal interest rate will rise less than inflation.

Question

Exhibit 27-1 
-According to the data in Exhibit 27-1,
A)real interest rates are negatively related to inflation. 
B)real interest rates are negatively related to the gap between real and potential GDP. 
C)real interest rates and real GDP are positively correlated. 
D)the Fed does not follow a monetary policy rule. 
E)the nominal interest rate will rise less than inflation.

Quizplus · Accepted Answer

Real interest rates and real GDP are positively correlated because higher real GDP often leads to higher demand for funds, which can increase real interest rates.

Exhibit 27-1 -According to the Data in Exhibit 27-1