Real Interest Rates at Times Have Been Negative

question 277

Essay

Real interest rates at times have been negative.Why would anyone lending money agree to a negative real interest rate?

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Definitions:

Marginal Cost

The price rise from the production of an additional unit of a product or service.

Diminishing Returns

A principle stating that as one input in the production process is incrementally increased, there will be a point at which the added output from each additional unit of input will start to decrease.

Diseconomies of Scale

This phenomenon occurs when a firm's production costs per unit increase as it produces more, due to inefficiencies that arise from scaling up operations.

Economic Profit

The economic result derived from subtracting a business's entire expenses, both explicit and implicit, from its total incoming funds.