You notice that when the inflation rate increases, the interest rate tends to increase. This observation indicates that
A) a cross- section graph of the inflation rate and the interest rate will show a positive relationship.
B) higher inflation rates must cause a higher interest rate.
C) a scatter diagram of the inflation rate and the interest rate will show a positive relationship.
D) there might be false causality between inflation and the interest rate.

Question

Quizplus · Accepted Answer

A scatter diagram of the inflation rate and the interest rate will show a positive relationship because the observation indicates that when the inflation rate increases, the interest rate tends to increase.

You Notice That When the Inflation Rate Increases, the Interest