Interest rates adjusted for the effects of inflation
A)and inflation are nominal variables.
B)and inflation are real variables.
C)are real variables;inflation is a nominal variable.
D)are nominal variables;inflation is a real variable.

Question

Quizplus · Accepted Answer

Interest rates adjusted for inflation are real variables because they reflect the true cost of borrowing. Inflation itself is a nominal variable as it represents the rate at which the general level of prices for goods and services is rising.

Interest Rates Adjusted for the Effects of Inflation