A central bank can control the real interest rate precisely,so long as ________ remains constant.
A)the nominal interest rate
B)monetary policy
C)expected inflation
D)all of the above
E)none of the above

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus expected inflation. Therefore, to control the real interest rate, the central bank must be able to keep expected inflation constant. The nominal interest rate is not within the complete control of the central bank, and monetary policy is a tool used by the central bank to influence the economy but is not a constant itself.

A Central Bank Can Control the Real Interest Rate Precisely,so