Suppose that the nominal interest rate and expected inflation rate both increase by 3%. These equal increases in the nominal interest rate and expected inflation rate will cause:
A) an increase in the real interest rate.
B) a decrease in government spending.
C) a decrease in money demand.
D) a decrease in investment.
E) a decrease in the real interest rate.

Question

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The Answer of Suppose that the nominal interest rate and expected inflation rate both increase by 3%. These equal increases in the nominal interest rate and expected inflation rate will cause:
A) an increase in the real interest rate.
B) a decrease in government spending.
C) a decrease in money demand.
D) a decrease in investment.
E) a decrease in the real interest rate.

Suppose That the Nominal Interest Rate and Expected Inflation Rate