If the value of your debt is increasing over time,we know that the:
A)real interest rate is positive.
B)nominal rate of interest is positive.
C)inflation rate is less than the nominal interest rate.
D)All of these statements are true.

Question

Quizplus · Accepted Answer

If the value of debt is increasing over time, it means that the real interest rate is positive.
Moreover, since the nominal interest rate comprises of the real interest rate and the expected inflation rate, if we know the real interest rate is positive, we also know that the nominal interest rate is positive. Hence, option A is true, and option B is also true.
Finally, since the inflation rate is the difference between the nominal and real interest rates, we see that the inflation rate is less than the nominal interest rate in this case. Hence, option C is also true. Therefore, the correct answer is option D.

If the Value of Your Debt Is Increasing Over Time,we