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Inflation increases and the central bank does not seem to care. answer:If the central bank leaves the nominal interest rate unchanged when inflation increases, the
Inflation increases and the central bank does not seem to care.
answer:If the central bank leaves the nominal interest rate unchanged when inflation increases, the real interest rate will fall and investment will increase. The borrowing cost is unchanged but firms expect that they can sell the goods at a higher price in the future, so they invest more.
The one highlighted is confusing, the real interest is declined by fisher equation, so the real borrowing cost is reduced, why did it say the borrowing cost is unchanged?
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