You notice that when the inflation rate increases, the interest rate tends to increase. This observation indicates that
A) there might be false causality between inflation and the interest rate.
B) higher inflation rates must cause a higher interest rate.
C) a scatter diagram of the inflation rate and the interest rate will show a positive relationship.
D) the variables have an inverse relationship.

Question

Quizplus · Accepted Answer

A positive relationship between inflation rate and interest rate is indicated by the observation that interest rates tend to increase with inflation rates. This is typically represented on a scatter diagram where the two variables show a positive correlation, meaning as one variable increases, so does the other.

You Notice That When the Inflation Rate Increases, the Interest