The real interest rate is:
A) adjusted for inflation.
B) the reported interest rate, not adjusted for inflation.
C) the interest rate paid to savers.
D) the interest rate charged to borrowers.

Question

Quizplus · Accepted Answer

The real interest rate is adjusted for inflation. This means that it reflects the true purchasing power of the interest earned or paid, after accounting for changes in the price level. Option B is incorrect because the reported interest rate does not account for inflation, and therefore does not provide an accurate measure of the real cost or benefit of borrowing or saving. Options C and D are also incorrect because they refer to nominal interest rates, which do not account for changes in inflation.

The Real Interest Rate Is