The most significant problem in trying to empirically measure the real rate of interest is that
A) there are so many different types of bonds.
B) expected inflation is unobservable.
C) interest rates fluctuate so much from day to day.
D) banks infrequently change the prime rate of interest.
E) there are so many different nominal interest rates.

Question

Quizplus · Accepted Answer

The most significant problem in trying to empirically measure the real rate of interest is that expected inflation is unobservable. The real rate of interest is the nominal interest rate adjusted for expected inflation. Since expected inflation is unobservable, it makes it difficult to accurately measure the real interest rate.

The Most Significant Problem in Trying to Empirically Measure the Real