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If Expected Inflation Is Constant and the Nominal Interest Rate

Question 1

Multiple Choice

If expected inflation is constant and the nominal interest rate increased 3 percentage points,what would happen to the real interest rate?


A) It would increase 3 percentage points.
B) It would increase,but by fewer than 3 percentage points.
C) It would decrease,but by fewer than 3 percentage points.
D) It would decrease by 3 percentage points.

Correct Answer:

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