Which of the following must occur for the nominal interest rate to be equal to the real interest rate?
A) Expected inflation is equal to the nominal interest rate.
B) Expected inflation is equal to the real interest rate.
C) The nominal and real interest rates can never be equal.
D) Expected inflation is equal to zero.
E) Expected inflation is equal to twice the real interest rate.

Question

Quizplus · Accepted Answer

The nominal interest rate equals the real interest rate when expected inflation is zero, according to the Fisher equation, which states that the nominal interest rate is the sum of the real interest rate and the expected inflation rate.

Which of the Following Must Occur for the Nominal Interest