When the expected inflation rate equals the actual inflation rate, the real interest rate was accurately estimated.

Question

Quizplus · Accepted Answer

When the expected inflation rate equals the actual inflation rate, the nominal interest rate and the real interest rate are the same. Therefore, if the real interest rate was estimated based on the expected inflation rate and the actual inflation rate turns out to be equal to the expected rate, then the estimated and actual real interest rates will match.

When the Expected Inflation Rate Equals the Actual Inflation Rate