From 1972 to 1974, the Expected Real Interest Rate on Short-Term

Multiple Choice

From 1972 to 1974, the expected real interest rate on short-term bonds averaged about +2 percent, but the realized real interest rate averaged about −2 percent.The main reason for the difference was that

A) actual inflation was about 4 percentage points lower than expected inflation.
B) actual inflation was about 4 percentage points higher than expected inflation.
C) a monopoly cornered the market on short-term bonds.
D) nominal rate of interest was zero.