All else equal, if inflation decreases by 0 %, what will happen to the nominal interest ra o The real interest rate will decrease by 0 %. o The nominal interest rate will decrease by 0 %. o The nominal interest rate will increase by 0 %. o The real interest rate will increase by 0%.

All else equal, if inflation decreases by 0 %, what will happen to the nominal interest ra o The real interest rate will decrease by 0 %. o The nominal interest rate will decrease by 0 %. o The nominal interest rate will increase by 0 %. o The real interest rate will increase by 0%.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Suppose the real interest rate is 3% and expected inflation is 3%. What is the nominal
interest rate?
nominal interest rate: =
I
All else equal, if inflation decreases by 0%, what will happen to the nominal interest rate?
o The real interest rate will decrease by 0%.
o The nominal interest rate will decrease by 0 %.
o The nominal interest rate will increase by 0%.
o The real interest rate will increase by 0%.
1
What do economists call the relationship between the nominal interest rate and the
inflation rate?
o shoeleather costs
Leontief paradox
86
• Taylor rule
Fisher equation

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