Woody wants to open a pet store and needs to buy a building.Both the nominal interest rate and the inflation rate increase by 2 percent.Now,Woody
A)will not buy the building.
B)is more likely to buy the building.
C)is less likely to buy the building.
D)is just as likely to buy the building as before.

Question

Woody wants to open a pet store and needs to buy a building.Both the nominal interest rate and the inflation rate increase by 2 percent.Now,Woody
A)will not buy the building.
B)​is more likely to buy the building.
C)​is less likely to buy the building.
D)​is just as likely to buy the building as before.

Quizplus · Accepted Answer

If both the nominal interest rate and the inflation rate increase by the same amount, the real interest rate remains unchanged, so Woody's decision is not affected by these changes.

Woody Wants to Open a Pet Store and Needs to Buy