Real interest rates can be positive, zero, or negative, but nominal interest rates can only be zero or positive.

Question

Quizplus · Accepted Answer

Nominal interest rates are the stated rates before adjustments for inflation, and while they can be zero or positive, they cannot be negative because lenders always charge some rate for the risk of lending. Real interest rates, which are adjusted for inflation, can be positive, zero, or negative depending on the inflation rate relative to the nominal interest rate.

Real Interest Rates Can Be Positive, Zero, or Negative, but Nominal