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Managing Interest Rates

A commonly seen headline in media is “Central bank increases the interest rate….”

(1) Is the rate that is increased the nominal rate or the real rate?

(2) What is the effect does the real interest rate and the nominal interest rate have on inflation?

(3) What happens to GDP if the real interest rate is decreased (if it can be decreased by the central bank) or decreases?

(4) What is the feasibility of achieving low inflation and high GDP growth for a country?

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Are you asking out of curiosity or is this a homework assignment?