If the Real Interest Rate Is Negative, It Must Mean

question 104

Multiple Choice

If the real interest rate is negative, it must mean that:

• A) in the short run, bond rates can be very volatile.
• B) in the short run, the real interest rate equals the marginal product of capital.
• C) in the short run, the real interest rate can deviate from the marginal product of capital.
• D) it is difficult to predict long-term interest rates.
• E) there is no relationship between long- and short-term interest rates.

---

Definitions:

Mean Standard Deviation Graph

A graphical representation that shows the variability of a dataset around its mean value, often used in statistics.

Expected Return

Expected return is the weighted average of the probable returns of an investment, accounting for all possible scenarios.

Risky Asset

An asset that carries a significant chance of losing part or all of its investment value.

Expected Profit

The forecasted amount of profit or loss that is anticipated from a business venture or investment, based on calculations or assumptions.