The following figure shows the inflation rate and ten-year bond yield. Refer to this figure when answering
Figure 14.4: Inflation and 10-Year Bond Yields
-Consider Figure 14.4 above. Between 2006 and 2007 the:
A) real interest rate was negative
B) 10-year-bonds' nominal interest rate was lower than inflation
C) real interest rate was higher than nominal interest rate
D) real interest rate was positive
E) None of these answers are correct.

Question

The following figure shows the inflation rate and ten-year bond yield. Refer to this figure when answering  
Figure 14.4: Inflation and 10-Year Bond Yields 
-Consider Figure 14.4 above. Between 2006 and 2007 the:
A) real interest rate was negative 
B) 10-year-bonds' nominal interest rate was lower than inflation 
C) real interest rate was higher than nominal interest rate 
D) real interest rate was positive 
E) None of these answers are correct.

Quizplus · Accepted Answer

Between 2006 and 2007, the inflation rate was higher than the nominal interest rate of the 10-year bonds. Therefore, the real interest rate (nominal interest rate - inflation rate) was positive.

The Following Figure Shows the Inflation Rate and Ten-Year Bond