The real interest rate is defined as the:
A)actual interest rate.
B)fixed rate on consumer loans.
C)nominal interest rate minus the inflation rate.
D)expected interest rate minus the inflation rate.
E)maximum interest rate.

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. This gives a more accurate picture of the true cost of borrowing money or the true return on investments. The actual interest rate (A) may fluctuate based on market conditions and other factors. The fixed rate on consumer loans (B) is a specific type of interest rate that may or may not be related to the real interest rate. The expected interest rate minus the inflation rate (D) is a future prediction and may not reflect current market conditions. The maximum interest rate (E) is not relevant to the real interest rate.

The Real Interest Rate Is Defined as The