During a time of inflation the nominal rate of interest will be

Name: During a time of inflation the nominal rate of interest will be
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Question

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During inflation, the purchasing power of money decreases, leading to an increase in nominal interest rates to compensate for the loss in purchasing power. However, the real interest rate (adjusted for inflation) actually decreases during inflationary periods. Therefore, the nominal rate of interest will be higher than the real rate.

During a Time of Inflation the Nominal Rate of Interest