Which of the following best defines the real interest rate (r)?
A) The amount of goods we must give up next year in order to consume more goods today.
B) The amount of goods we must give up today in order to have more dollars next year.
C) The amount of dollars we must give up next year in order to consume more goods today.
D) The amount of dollars we must give up today in order to consume more goods today.
E) The amount of dollars we must give up next year in order to have more dollars today.

Question

Quizplus · Accepted Answer

The real interest rate essentially reflects the trade-off between consuming goods today versus in the future. It represents the amount of goods one must forgo in the future (next year) to consume more today, taking into account the purchasing power of money over time.

Which of the Following Best Defines the Real Interest Rate