The nominal interest rate can be negative if:
A) the real interest rate is negative.
B) inflation is variable.
C) the inflation rate is greater than the nominal interest rate.
D) inflation is unexpected.
E) None of the above.

Question

Quizplus · Accepted Answer

The nominal interest rate cannot be negative under normal circumstances, as it represents the stated rate before adjusting for inflation. Negative nominal rates are typically a result of unconventional monetary policies or specific economic conditions, not directly due to the real interest rate or inflation dynamics described in the other options.

The Nominal Interest Rate Can Be Negative If