Recall the Application about Fed Chairman Ben Bernanke's views on how to fight a liquidity trap to answer the following question(s).
-Recall the Application. If nominal interest rates are ________ and the inflation rate is expected to be ________, the result will be negative real interest rates.
A) close to zero; low
B) close to zero; high
C) high; close to zero
D) low; close to zero

Question

Quizplus · Accepted Answer

Real interest rates are calculated by subtracting the expected inflation rate from the nominal interest rate. If nominal rates are close to zero and expected inflation is high, the real interest rate will indeed be negative.

Recall the Application About Fed Chairman Ben Bernanke's Views on How