If the nominal interest rate is the same as the real interest rate, then inflation must be:
A) zero.
B) higher than the nominal rate of interest.
C) lower than the nominal rate of interest.
D) negative.

Question

Quizplus · Accepted Answer

If the nominal interest rate is equal to the real interest rate, there is no inflation. This means that the increase in nominal value is equal to the increase in real value, and there is no erosion of purchasing power due to inflation.

If the Nominal Interest Rate Is the Same as the Real