Question

How can there ever exist negative real interest rates in the economy?

Answer 1

Answer:

Negative real interest rates occur in "high inflation environments".

Explanation:

• Rates of interest can sometimes be unfavorable, as can completely accurate rates. Under high-inflation environments, declining real expectations appear especially when inflation continues rising rapidly, that is, quicker than prices.
• If prices are 5 percent, however, unemployment is 7 percent, so the actual rate becomes 2 percent negative.