The real interest rate is:

Question

Quizplus · Accepted Answer

The real interest rate is adjusted for inflation, which means it takes into account the impact of rising prices on the purchasing power of the money being earned or borrowed. Option A is incorrect because the federal funds rate is the rate at which banks lend funds to each other overnight and is set by the Federal Reserve, while the real interest rate is influenced by inflation and other market forces. Option C is partially correct but does not account for inflation. Option D is also incorrect because the actual average interest rate in the economy can be influenced by many factors beyond inflation, such as economic growth and monetary policy.

The Real Interest Rate Is