LorrinCFA

What confused me a bit on this one is that it says NOMINAL rates would increase. I agree with what you say above Job711, but the fact that its nominal and not real confused me. Any clarification

LorrinCFA

I was looking for real interest rates as well, as it makes the question a lot clearer. However this question would only be incorrect if we’re assuming the international fisher theory is holding (that all real interest rates are equal). Otherwise an increase in nominal rates may indicate an increasing real rate, as it doesn’t specify it would be all inflation (I think).
Regardless, it’s things like this that make me dislike Schweser. They are a bit to casual with their wording sometimes, so it makes you analyze things that the question isn’t necessarily meant to test.