Which one of the following is correct concerning real interest rates?
A)real interest rates are constant.
B)real interest rates must be positive.
C)real interest rates must be less than nominal interest rates.
D)real interest rates, if positive, increase purchasing power over time.

Question

Quizplus · Accepted Answer

Real interest rates, if positive, increase purchasing power over time as they take into account the effects of inflation on the value of money. Real interest rates are not constant and can fluctuate depending on changes in inflation and nominal interest rates. Real interest rates can be positive or negative, but if they are negative, then purchasing power decreases over time. Additionally, real interest rates can be higher or lower than nominal interest rates depending on the level of inflation.

Which One of the Following Is Correct Concerning Real Interest