The \'Professor X\' embarks on a study of the relation between consumption and i

Question

The 'Professor X' embarks on a study of the relation between consumption and inflation in the country TGBM. AT some particular time t, inflation in TGBM has been equal to 10% for such a long time, people would have gotten used to it. Then at time t, expected inflation for the time to come must be also just equal to 10%. In Professor X's analysis, the real interest rate at time t is set equal to the difference between the nominal interest rate then and expected inflation, which is thought to be equal to 10%.

What kind of even that took place at or just before time t might completely invalidate Professor X's study?

Explanation / Answer

a war, depression or recession all can have an effect on interest rates that might invalidate professor x's claim

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