If the real interest rate is expected to become negative, then the purchasing power of savings would be ____, as the inflation rate is expected to be ____ the existing nominal interest rate.
A)decreasing; less than
B)decreasing; greater than
C)increasing; greater than
D)increasing; less than

Question

If the real interest rate is expected to become negative, then the purchasing power of savings would be ____, as the inflation rate is expected to be ____ the existing nominal interest rate. ​
A)decreasing; less than
B)decreasing; greater than
C)increasing; greater than
D)increasing; less than

Quizplus · Accepted Answer

When the real interest rate is expected to become negative, it means that the inflation rate is higher than the nominal interest rate, leading to a decrease in the purchasing power of savings.

If the Real Interest Rate Is Expected to Become Negative