When the Fed lowers the nominal interest rate to zero, what is the real interest rate?
A) $- \pi _ { t }$
B) $i _ { t } - \pi _ { t }$
C) zero
D) equal to the nominal interest rate
E) undetermined

Question

Quizplus · Accepted Answer

The real interest rate is calculated as the nominal interest rate minus the inflation rate. If the nominal interest rate is zero, the real interest rate is $- \pi _ { t }$, where $\pi _ { t }$ is the inflation rate.

When the Fed Lowers the Nominal Interest Rate to Zero −πt- \pi _ { t }−πt​

When the Fed Lowers the Nominal Interest Rate to Zero $- \pi _ { t }$