Question: The short-term nominal interest rate is 5%, with an expected inflation of290. Economists forecast that next year's nominal rate will increase by 100 basis points,

The short-term nominal interest rate is 5%, with an expected inflation

The short-term nominal interest rate is 5%, with an expected inflation of290. Economists forecast that next year's nominal rate will increase by 100 basis points, but inflation will fall to 1.5% What is the expected change in real interest rates? 4

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