Question
What is the likely impact on all interest rates when the real rates are high?
Multiple choice question.
It will increase
It will decrease by 1% if real rate increases by 1%
It will decline
It will not be affected
Multiple choice question.
It will increase
It will decrease by 1% if real rate increases by 1%
It will decline
It will not be affected
Answers
GPT-4o mini
The correct answer is:
**It will increase**
When real interest rates are high, it generally leads to higher nominal interest rates as lenders demand a higher return for the opportunity cost of lending, which can influence borrowing costs across the economy.
**It will increase**
When real interest rates are high, it generally leads to higher nominal interest rates as lenders demand a higher return for the opportunity cost of lending, which can influence borrowing costs across the economy.