I am not bad.

[Odessa Dawn]

If I were asked how are you, would it be correct to say I am not bad?

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[charliedeut]

You would probably be more likely to simply hear "Not bad" or "Can't complain".

PS: Personally, I only answer that way in jest. I prefer to say "I'm fine" or "Very well", followed by "thank you", "thanks" or "thank you, and you?"