Which of the Following Statements Is True

question 13

Multiple Choice

Which of the following statements is true?

• A)The real interest rate matters more to borrowers than the nominal interest rate.
• B)The nominal interest rate is equal to the real interest rate minus the expected inflation rate.
• C)If there is expected deflation (expected decline in the price level), instead of expected inflation, the nominal interest rate will be greater than the real interest rate.
• D)The nominal interest rate is determined by the demand for credit and the supply of credit, or by the demand for loanable funds and the supply of loanable funds.
• E)If there is expected deflation, the nominal interest rate will necessarily be negative.