Negative real rates of interest tend to:
A) increase economic growth.
B) reduce economic growth.
C) have no impact on economic growth.
D) exist only in poor countries.

Question

Quizplus · Accepted Answer

Negative real rates of interest, which occur when nominal rates are lower than the rate of inflation, generally reduce economic growth. This is because savers receive lower returns on their investments, leading to reduced savings and investment, which can ultimately lead to lower levels of economic activity. Thus, negative real interest rates can discourage saving and investment and dampen the overall economic growth.

Negative Real Rates of Interest Tend To