Which of the Following Statements Is True

question 119

Multiple Choice

Which of the following statements is true?

• A)The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate.
• B)The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate.
• C)The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent.
• D)It is the nominal interest rate-not the real interest rate-that matters to borrowers.

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