During the Great Depression, the price level fell during some years.
a. With a falling price level, what happens to the actual real interest rate? Does your answer depend on what happens to the nominal interest rate? Briefly explain.
b. In contrast, during the 2007–2009 financial crisis, nominal interest rates on Treasury bills were close to zero, and inflation remained positive.
What was the actual real interest rate on Treasury bills during this period?
c. Why would savers be willing to hold Treasury bills with a negative real interest rate?