The Real Interest Rate Must Be

question 34

Multiple Choice

The real interest rate must be

• A)negative if the nominal rate of interest is greater than the rate of inflation.
• B)low if the nominal interest rate is high.
• C)positive if the nominal rate of interest is greater than the rate of inflation.
• D)high if the inflation rate is greater than the nominal interest rate.
• E)high if the nominal interest rate is high.

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Definitions:

Borrower

An individual, corporation, or other entity that receives funds from another party under the condition of returning the funds plus interest or other charges at a later date.

Lender

A financial institution or individual that provides funds to a borrower under the condition that the funds will be repaid with interest.

Supply

The aggregate sum of a good or service ready for sale at a specific price level.

Loanable Funds

The money available for borrowing in the financial markets, determined by saving behaviors and institutional lenders' policies.