Which of the following statements best describes the real interest rate?
A) Real interest rates exceed inflation rates.
B) Real interest rates can decline only to zero.
C) Real interest rates can be negative, zero, or positive.
D) Real interest rates traditionally exceed nominal rates.

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate adjusted for inflation. Therefore, it can be negative if inflation exceeds the nominal interest rate, zero if they are equal, or positive if the nominal interest rate is greater than inflation. There is no guarantee that real interest rates will always exceed inflation rates, and they can fluctuate over time.

Which of the Following Statements Best Describes the Real Interest