An increase in the actual rate of inflation is most likely to cause a decrease in ________.
A)the ex post real interest rate
B)the ex ante real interest rate
C)the nominal interest rate
D)the expected real interest rate
E)none of the above

Question

Quizplus · Accepted Answer

An increase in the actual rate of inflation decreases the ex post real interest rate because the real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. If inflation increases, the real value of interest returns decreases, assuming the nominal interest rate remains constant.

An Increase in the Actual Rate of Inflation Is Most