If the nominal interest rate falls,everything else remaining unchanged,________.
A) the real interest rate will rise
B) the real interest rate will fall
C) the real interest rate will remain unchanged
D) the inflation rate will decrease

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the expected inflation rate from the nominal interest rate. If the nominal interest rate falls and everything else remains unchanged, the real interest rate will fall as well because the decrease in nominal interest rate will not be enough to offset inflation.

If the Nominal Interest Rate Falls,everything Else Remaining Unchanged,________