(A). Please define real versus nominal interest rates. Do we using see figures in the press stated in nominal or real terms? When expected inflation is positive, is nominal inflation greater than or less than real? What if expected inflation is negative, what happens to the relationship?

(B). The relationship between nominal and real interest rates continues to hold when there is deflation rather than inflation, except the overall change in prices is now negative. For example, take the case where the desired real interest rate is 3%., the expected deflation rate is -2%, and the actual deflation rate is -3%. What is the nominal interest rate? The actual real interest rate? If the reduction in prices is greater than expected, do borrowers or lenders benefit? Explain.

Answer rating: 100% (QA)

A Simply put nominal interest rates are rates quoted in something like your loan agreement Another example is that it is the amount on my for example ... View the full answer