When the inflation rate is negative, the
A)real interest rate is greater than the nominal interest rate.
B)nominal interest rate is zero.
C)real interest rate equals the nominal interest rate.
D)real interest rate is less than the nominal interest rate.

Question

Quizplus · Accepted Answer

When the inflation rate is negative, it means prices are falling, which increases the real interest rate relative to the nominal interest rate.

When the Inflation Rate Is Negative, the