If inflation does not adjust rapidly,then when the Bank of Canada increases the nominal interest rate,the real interest rate in the short run will
A) increase.
B) decrease.
C) not change.
D) equal the nominal interest rate.
E) be determined by saving and investment decisions.

Question

Quizplus · Accepted Answer

If inflation does not adjust rapidly, then the increase in the nominal interest rate will cause the real interest rate to increase in the short run. This is because the nominal interest rate will be higher than the inflation rate, leading to a higher real interest rate.

If Inflation Does Not Adjust Rapidly,then When the Bank of Canada