1. For central bankers to alter the real interest rate by changing the nominal interest rate, which of the following must be true?
A. Inflation expectations are quite stable.
B. The expected rate of inflation has to change.
C. The change in the expected rate of inflation must equal the change in the nominal interest rate.
D. The rate of inflation has to remain constant.
2. Yields on bonds must be above the effective lower bound because:
A. the technology of banking cannot deal with negative yields.
B. positive yields are guaranteed by the U.S. Treasury.
C. investors can always hold cash.
D. demand deposits cannot have negative real returns.