Whenever the expected inflation rate is positive
A)the real interest rate is greater than the nominal interest rate.
B)the real interest rate is negative.
C)the real interest rate is positive.
D)the nominal interest rate must be equal to the real interest rate.
E) none of the above

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the expected inflation rate. If the expected inflation rate is positive, the real interest rate is less than the nominal interest rate, not necessarily negative or positive.

Whenever the Expected Inflation Rate Is Positive