Multiple Choice
Say that initially the nominal interest rate is 6% and prices are stable, but the inflation rate the following year rises to 3%. If the real rate of interest is to remain unchanged, the nominal interest rate in the second year must:
A) rise by 9 percentage points.
B) rise by 6 percentage points.
C) rise by 3 percentage points.
D) remain unchanged.
Correct Answer:
Verified
Correct Answer:
Verified
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