An increase in consumer confidence will cause: a) the neutral or medium-run real interest rate to rise b) the neutral real interest rate to fall c) ambiguous effects on the natural real interest rate d) no effect on the neutral real interest rate

The correct answer is d.

When consumer confidence is high, it usually doesn't affect the natural real interest rate. This is because the natural real rate of interest is usually described as the short -interval real interest which remains constant in an economy. The rate is normally not approving or regulative and is accompanied by stable prices and full employment. This means that inflation is usually constant. Therefore, when consumer confidence is high, prices are usually stable, and employment is in plenty, which means that the neutral real interest rate is not affected.