Question

According to the Fisher effect, a decrease in _____ inflation causes an equal decrease in the _____ interest rate.

Question 3 options:

	expected, nominal
	expected, real
	unexpected, nominal
	unexpected, real

Because most loans are specified in nominal terms, low _____ inflation hurts _____.

Question 4 options:

expected, debtors

expected, creditors

unexpected, debtors

unexpected, creditors

If the demand for real money balances depends on nominal interest rate, then lower inflation can

Question 5 options:

reduce the quantity of real money balances.

An economy with constant velocity has real GDP growth of 1 percent, money growth of 7 percent, and a real interest rate of 2 percent. The nominal interest rate is _______ percent.

Question 2 options:

2

6

8

12

increase the nominal interest rate.

be caused by an acceleration in the rate of real GDP growth.

arise from the expectation of future money growth.

Answer 1