For this question,assume that expected inflation is zero.In this situation,we know that
A)the nominal and real interest rates are equal.
B)the nominal interest rate will exceed the real interest rate.
C)the real interest rate will exceed the nominal interest rate.
D)the real interest will be zero.
E) the real interest rate is negative.

Question

Quizplus · Accepted Answer

If expected inflation is zero, then the nominal and real interest rates are equal. This is because the nominal interest rate is the rate at which money grows in nominal terms, while the real interest rate adjusts for inflation and represents the true return on investment. With zero expected inflation, there is no difference between the nominal and real interest rates, so they are equal.

For This Question,assume That Expected Inflation Is Zero