When there is high inflation
A)the nominal interest rate is always greater than the real interest rate.
B)interest rates fall due to government policy.
C)the real interest rate is always negative.
D)the nominal interest rate is approximately equal to the real interest rate.
E)the real interest rate is always greater than the nominal interest rate.

Question

Quizplus · Accepted Answer

The nominal interest rate typically includes the real interest rate plus the expected inflation rate. When inflation is high, the nominal interest rate is adjusted upwards to compensate for the loss of purchasing power, making it greater than the real interest rate.

When There Is High Inflation