The difference between the nominal interest rate and the real interest rate is the
A) inflation rate.
B) unemployment rate.
C) GDP growth rate.
D) money growth rate minus the growth rate of real GDP.
E) price level.

Question

Quizplus · Accepted Answer

The nominal interest rate is the rate at which money is borrowed or lent without adjusting for the effects of inflation. The real interest rate, on the other hand, takes into account the inflation rate, providing a more accurate measure of the true cost of borrowing or the true return on investment. Therefore, the difference between the nominal interest rate and the real interest rate is equal to the inflation rate.

The Difference Between the Nominal Interest Rate and the Real