During the Great Depression,
A)deflation raised the real interest rate.
B)unemployment lowered the nominal interest rate.
C)deflation lowered the real interest rate.
D)unemployment increased the output gap.
E)high interest rates increased inflation.

Question

Quizplus · Accepted Answer

During the Great Depression, deflation increased the real interest rate because the nominal interest rates were low, but the falling prices increased the real value of debt.