When the inflation rate is zero, the
A)real interest rate is negative.
B)nominal interest rate is zero.
C)demand for loanable funds increases.
D)supply of loanable funds decreases.
E)real interest rate equals the nominal interest rate.

Question

Quizplus · Accepted Answer

When the inflation rate is zero, the real interest rate equals the nominal interest rate. This is because there is no inflation to account for, so there is no need to adjust the nominal interest rate for inflation.

When the Inflation Rate Is Zero, the