Multiple Choice
In year 1 the price level is constant and the nominal rate of interest is 6 percent. But in year 2 the inflation rate is 3 percent. If the real rate of interest is to remain at the same level in year 2 as it was in year 1, then in year 2 the nominal interest rate must
A) rise by 9 percentage points.
B) rise by 3 percentage points.
C) fall by 3 percentage points.
D) rise by 6 percentage points.
Correct Answer:
Verified
Correct Answer:
Verified
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