The real rate of return on holding cash ________ inflation is correctly anticipated.
A)is higher when
B)is lower when
C)does not depend on whether
D)equals the nominal interest rate when

Question

Quizplus · Accepted Answer

Because the nominal rate of return on holding cash is always zero regardless of the rate of inflation, the real rate of return does not depend on whether or not inflation is correctly anticipated. Only the actual inflation rate will impact the real rate of return on holding cash.

The Real Rate of Return on Holding Cash ________ Inflation