Suppose nominal interest rates increase from 8 percent to 10 percent, while inflation increases from 3 percent to 12 percent. What then happens to the real interest rate? It falls from 5 percent to -2 percent. It rises from -2 percent to 5 percent. It falls from 12 percent to 8 percent. It rises from 8 percent to 12 percent.

Suppose nominal interest rates increase from 8 percent to 10 percent, while inflation increases from 3 percent to 12 percent. What then happens to the real interest rate? It falls from 5 percent to -2 percent. It rises from -2 percent to 5 percent. It falls from 12 percent to 8 percent. It rises from 8 percent to 12 percent.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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