contestada

An increase in the expected rate of inflation will:______a. the real rate of interest.b. the nominal rate of interest.c. both the real and the nominal rates of interest.d. neither of the above, unless the increase in inflation is anticipated.e. the real rate of interest only if the inflation is unanticipated.

Respuesta :

Answer:

B

Explanation:

Inflation is a persistent rise in general price levels

Real rate of interest is interest rate adjusted for inflation.

Nominal rate of interest is real interest rate added with the real rate of interest

Nominal Interest Rate = Real rate of interest + inflation rate

If inflation is expected, it would be incorporated into the nominal rate of interest.

For example, if the nominal rate of interest is 9% and expected inflation is 2%. Nominal interest rate would become 11% (9% + 2%)

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