What explains the trends in nominal interest rates?
A) inflation rates
B) aggregate economic activity
C) standards of living
D) wages
E) consumer incomes

Question

Quizplus · Accepted Answer

Nominal interest rates are closely tied to inflation rates. As inflation increases, nominal interest rates tend to rise as well to compensate for the loss of purchasing power of money over time. In contrast, when inflation is low, nominal interest rates tend to be lower as well.

What Explains the Trends in Nominal Interest Rates