When the expected rate of inflation is added to the real interest rate, the result is called the
A) preferred rate.
B) nominal interest rate.
C) adjustment rate.
D) differential rate.

Question

Quizplus · Accepted Answer

The nominal interest rate is calculated by adding the expected rate of inflation to the real interest rate. This represents the actual interest rate that borrowers and lenders agree upon, and takes into account the impact of inflation on the value of money over time. Choices A, C, and D are not accurate terms in this context.

When the Expected Rate of Inflation Is Added to the Real