What insight about negative interest rates is clear from the Fisher equation?
A) Negative real interest rates are most likely to occur when the inflation rate is low.
B) Negative nominal interest rates are most likely to occur when the inflation rate is low.
C) Negative real interest rates are more likely to occur than negative nominal interest rates.
D) Negative nominal interest rates are more likely to occur than negative real interest rates.

Question

Quizplus · Accepted Answer

The Fisher equation relates nominal interest rates, real interest rates, and inflation. It shows that negative real interest rates can occur when nominal rates are low but positive, and inflation is high enough to make the real rate (nominal rate minus inflation) negative. This is more common than negative nominal rates, which require a policy decision by central banks.

What Insight About Negative Interest Rates Is Clear from the Fisher