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Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383

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BuyFindarrow_forward

Economics (MindTap Course List)

13th Edition
Roger A. Arnold
ISBN: 9781337617383
Textbook Problem

The real interest rate can remain unchanged as the nominal interest rate rises. Do you agree or disagree with this statement? Explain your answer.

To determine

Identify the difference between the real interest rate and the nominal interest rate.

Explanation

The nominal interest rate is the interest rate that is before adjusting with the inflation, whereas the real interest rate is the interest rate after discounting the rate of inflation from the nominal interest rate. Therefore, even if the nominal interest rate increases, the real interest rate can remain the same...

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