The expected real interest rate (r^e) in terms of the nominal interest rate (R) and the expected inflation rate (π^e) is given by A) r^e = π^e + R. B) r^e = 2π^e + R². C) r^e = π^e + R². D) r^e = R - π^e. E) r^e = R² - π^e.

Question

Quizplus · Accepted Answer

The expected real interest rate is calculated by subtracting the expected inflation rate from the nominal interest rate: r^e = R - π^e.

The Expected Real Interest Rate (Re) in Terms of the Nominal

The Expected Real Interest Rate (R^e) in Terms of the Nominal