The difference between the nominal rate of interest and the real rate of interest is the
A)interest rate.
B)expected interest rate.
C)expected rate of inflation.
D)advertised interest rate.

Question

Quizplus · Accepted Answer

The nominal rate of interest is the stated interest rate without any adjustment for inflation, while the real rate of interest is the nominal rate minus the expected rate of inflation. Therefore, the difference between the nominal rate and the real rate is the expected rate of inflation, which is represented by choice C. Choices A, B, and D are incorrect because they do not accurately describe the difference between nominal and real interest rates.

The Difference Between the Nominal Rate of Interest and the Real