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If Expected Inflation Is Constant and the Nominal Interest Rate

Question 37

Multiple Choice

If expected inflation is constant and the nominal interest rate increases by 3.5 percentage points, then the real interest rate


A) increases by 3.5 percentage points.
B) increases, but by less than 3.5 percentage points.
C) decreases, but by less than 3.5 percentage points.
D) decreases by 3.5 percentage points.

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