When the Inflation Rate Is Negative, the

question 219

Multiple Choice

When the inflation rate is negative, the

• A) real interest rate is greater than the nominal interest rate.
• B) real interest rate is less than the nominal interest rate.
• C) nominal interest rate is zero.
• D) real interest rate equals the nominal interest rate.

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Definitions:

Time Periods

Distinct intervals of time within which certain activities or events occur or are completed.

Simple Interest

Simple interest is a method of calculating the interest charge on a loan based on the original principal balance without compounding.

Rate of Return

The financial improvement or decline in an investment across a particular period, indicated as a percentage of the investment’s entry cost.

Interest

The fee associated with the right to borrow funds, usually indicated as a yearly percentage rate.