According to the General MP Rule of the IS-MP-PC Model

Multiple Choice

According to the general MP rule of the IS-MP-PC model, a 1% increase in both the current inflation rate and the inflation target of the central bank will cause the central bank to:

A) raise the nominal interest rate by 1%.
B) raise the real interest rate by 1%.
C) keep the nominal interest rate constant.
D) none of the above.