If the nominal rate of interest is 5 percent for a bond issued by the United States Government and the inflation rate is 2 percent, the real rate of interest is ___. The nominal rate of interest will _______ if the inflation rate rises or increases to 6 percent (that is, the inflation rate increases by 4 percent). A. unknown; rise by 4 percent B. 3 percent; rise by 4 percent C. 3 percent; fall by 4 percent D. 7 percent; fall by 4 percent
If the nominal rate of interest is 5 percent for a bond issued by the United States Government and the inflation rate is 2 percent, the real rate of interest is ___. The nominal rate of interest will _______ if the inflation rate rises or increases to 6 percent (that is, the inflation rate increases by 4 percent). A. unknown; rise by 4 percent B. 3 percent; rise by 4 percent C. 3 percent; fall by 4 percent D. 7 percent; fall by 4 percent
Chapter18: Introduction To Macroeconomics: Unemployment, Inflation, And Economic Fluctuations
Section: Chapter Questions
Problem 13P
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If the nominal rate of interest is 5 percent for a bond issued by the United States Government and the inflation rate is 2 percent, the real rate of interest is ___. The nominal rate of interest will _______ if the inflation rate rises or increases to 6 percent (that is, the inflation rate increases by 4 percent).
unknown; rise by 4 percent
3 percent; rise by 4 percent
3 percent; fall by 4 percent
7 percent; fall by 4 percent
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