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Question
From 1972 to 1974, the expected real interest rate on short-term bonds averaged about +2 percent, but the realized real interest rate averaged about −2 percent. The main reason for the difference was thata. actual inflation was about 4 percentage points lower than expected inflation.
b. actual inflation was about 4 percentage points higher than expected inflation.
c. a monopoly cornered the market on short-term bonds.
d. nominal rate of interest was zero.
Answer
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