If the purchasing power of your debt is increasing over time, we know that the:
A) real interest rate is positive.
B) nominal rate of interest is positive.
C) inflation rate is greater than the nominal interest rate.
D) real interest rate is negative.

Question

Quizplus · Accepted Answer

The purchasing power of debt refers to the amount of goods and services that can be purchased with the amount borrowed. If the purchasing power of debt is increasing over time, it means that the inflation rate is higher than the nominal interest rate, resulting in a positive real interest rate. Therefore, the correct answer is A.

If the Purchasing Power of Your Debt Is Increasing Over