If the inflation rate is zero, then
A)both the nominal interest rate and the real interest rate can fall below zero.
B)the nominal interest rate can fall below zero, but the real interest rate cannot fall below zero.
C)the real interest rate can fall below zero, but the nominal interest rate cannot fall below zero.
D)neither the nominal interest rate nor the real interest rate can fall below zero.

Question

Quizplus · Accepted Answer

When the inflation rate is zero, the real interest rate is equal to the nominal interest rate. Therefore, neither the nominal interest rate nor the real interest rate can fall below zero.

If the Inflation Rate Is Zero, Then