The ________ interest rate is adjusted for expected changes in the price level.
A)ex ante real
B)ex post real
C)ex post nominal
D)ex ante nominal

Question

Quizplus · Accepted Answer

Ex ante real interest rate takes into account the expected changes in the inflation rate, making it a more accurate reflection of the true cost of borrowing or the true return on investment. Ex post real interest rate is calculated after inflation has already occurred, and therefore is less useful for making informed financial decisions. Ex post nominal interest rate does not adjust for inflation and is simply the stated interest rate. Ex ante nominal interest rate is the stated interest rate before any inflation adjustment, which also does not reflect the true cost of borrowing or return on investment.

The ________ Interest Rate Is Adjusted for Expected Changes in the Price