Which of the following statements regarding real and nominal interest rates is true?
A)Although real interest rates may be either positive or negative, nominal interest rates will always be positive.
B)Although nominal interest rates may be either positive or negative, real interest rates will always be positive.
C)If a security has a positive nominal return, then its real return will also be positive.
D)Both real and nominal interest rates may be either positive or negative.

Question

Quizplus · Accepted Answer

DA) Nominal interest rates are typically observed rates that have not been adjusted for inflation, and while they are usually positive, there have been instances of negative nominal rates in some economies. However, they are more commonly positive than real rates, which are adjusted for inflation and can more readily be negative if inflation exceeds the nominal rate.D) Both real and nominal interest rates can indeed be either positive or negative. Real interest rates adjust nominal rates for inflation, potentially leading to negative values if inflation is high. Nominal rates can also be negative, as seen in some economies' central bank policies to encourage spending and investment.

Which of the Following Statements Regarding Real and Nominal Interest