Which of the Following Statements Is True

Multiple Choice

Which of the following statements is true?

A) The nominal interest rate is always higher than the real interest rate since the nominal interest rate equals the real interest rate plus the expected inflation rate.
B) The nominal interest rate is always lower than the real interest rate since the nominal interest rate equals the real interest rate minus the expected inflation rate.
C) The nominal interest rate can equal the real interest rate, but to do so the expected inflation rate must be zero percent.
D) It is the nominal interest rate-not the real interest rate-that matters to borrowers.