The pure rate of interest is approximated by the
A) rate that savings and loan associations charge on mortgage loans.
B) rate charged consumers by credit card companies.
C) rate paid on long-term government bonds.
D) announced rate at which commercial banks make business loans.

Question

Quizplus · Accepted Answer

The pure rate of interest is the theoretical rate that is free from any inflation or risk premiums. The rate paid on long-term government bonds is often used as an approximation of this pure rate.

The Pure Rate of Interest Is Approximated by the