If the value of your debt is decreasing over time, we know that:
A) the real interest rate is negative.
B) inflation is zero.
C) the real interest rate is positive.
D) the real interest rate is zero.

Question

Quizplus · Accepted Answer

A decreasing debt value means that the amount owed is shrinking due to payments or other factors. If the real interest rate were positive, the debt value would increase over time. If inflation were zero, the nominal interest rate and real interest rate would be the same, and the debt value would not decrease. Therefore, the only option is that the real interest rate is negative, meaning that the inflation rate is higher than the nominal interest rate, resulting in a decrease in the debt value over time.

If the Value of Your Debt Is Decreasing Over Time