57 Sample Question TR The nominal interest rate must always

57 Sample Question (T/R) . The nominal interest rate must always be higher than the real interest rate.

Solution

False.

Nominal interest rate = Real interest rate + Inflation rate

If Inflation rate > 0, Nominal interest rate > Real interest rate, but if inflation rate < 0 (i.e. deflation), in that case Nominal interest rate < Real interest rate.