conomy is at a short-run equilibirum where nominal interest rates (i) are zero and there is a deep recession. If expectations of inflation de-anchor, so that 0 gets closer to 1 and people start to expect deflation: a) real interest rates may increase leading to a fall in investment and output b) real interest rates may decrease leading to a fall in investment and output c) the natural rate of interest will be zero and the economy will retun to potential output d) real interest rates may increare landing

conomy is at a short-run equilibirum where nominal interest rates (i) are zero and there is a deep recession. If expectations of inflation de-anchor, so that 0 gets closer to 1 and people start to expect deflation: a) real interest rates may increase leading to a fall in investment and output b) real interest rates may decrease leading to a fall in investment and output c) the natural rate of interest will be zero and the economy will retun to potential output d) real interest rates may increare landing

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 8PA

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