Asked by Amber Abugharbieh on May 08, 2024
Verified
The real interest rate can be negative.
Real Interest Rate
is the interest rate adjusted for the effects of inflation, representing the true cost of borrowing and the real yield to investors.
- Comprehend the connection between nominal and real interest rates and inflation.
Verified Answer
ST
Shanice TakeallMay 10, 2024
Final Answer :
True
Explanation :
The real interest rate can be negative when the nominal interest rate is lower than the rate of inflation. This means that while the borrower may be paying a positive nominal interest rate, the actual value of the loan decreases due to inflation, resulting in a negative real interest rate.
Learning Objectives
- Comprehend the connection between nominal and real interest rates and inflation.