Equilibrium in the market for goods and services determines the ______ interest rate and the expected rate of inflation determines the ______ interest rate.
A) ex ante real; ex ante nominal
B) ex post real; ex post nominal
C) ex ante nominal; ex post real
D) ex post nominal; ex post real

Question

Quizplus · Accepted Answer

Equilibrium in the market for goods and services determines the ex ante real interest rate, which is the interest rate adjusted for expected inflation. The expected rate of inflation determines the ex ante nominal interest rate, which is the stated interest rate before adjusting for inflation.

Equilibrium in the Market for Goods and Services Determines the ______