Which of the following equations is accurate?
A) money interest rate = real interest rate − inflationary premium
B) real interest rate = money interest rate + inflationary premium
C) real interest rate = money interest rate − inflationary premium
D) real interest rate = money interest rate

Question

Quizplus · Accepted Answer

The equation for real interest rate is R = M - I, where R is the real interest rate, M is the nominal interest rate or money interest rate, and I is the inflation rate. To solve for M, we can rearrange the equation as M = R + I. However, the question asks for the equation that is accurate, and the accurate equation is the original formula for real interest rate, which is R = M - I. Therefore, the correct choice is C.

Which of the Following Equations Is Accurate