If nominal interest rates increase:
A)the expected inflation rate must have gone up.
B)the real interest rate must have gone up.
C)either the expected inflation rate went up, the real interest rate went up, or both.
D)either the expected inflation rate went down, the real interest rate went down, or both.

Question

Quizplus · Accepted Answer

Nominal interest rates can increase due to a rise in expected inflation, an increase in the real interest rate, or a combination of both. The nominal interest rate is the sum of the real interest rate and the expected inflation rate.

If Nominal Interest Rates Increase