If the nominal interest rate is less than the real interest rate,we know that
A)both the nominal or real interest rate must be negative.
B)the nominal interest rate must be equal to expected inflation.
C)expected deflation must be occurring.
D)expected inflation must be positive.
E) expected inflation must be zero.

Question

Quizplus · Accepted Answer

Expected deflation must be occurring for the nominal interest rate to be less than the real interest rate, as this implies that the inflation rate is negative.

If the Nominal Interest Rate Is Less Than the Real