If the inflation rate exceeds the nominal rate of interest,
A) the real interest rate is negative.
B) lenders lose.
C) savers lose.
D) all of the above.

Question

Quizplus · Accepted Answer

When the inflation rate exceeds the nominal interest rate, the real interest rate becomes negative, which means the purchasing power of money decreases. This situation results in losses for both lenders and savers, as the returns on their money do not keep up with inflation.

If the Inflation Rate Exceeds the Nominal Rate of Interest