The real interest rate can be estimated by
A)subtracting the pure interest rate from the nominal interest rate.
B)dividing the nominal interest rate by the consumer price index.
C)subtracting the nominal interest rate from the rate of inflation.
D)subtracting the rate of inflation from the nominal interest rate.

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the rate of inflation from the nominal interest rate. This adjustment removes the effects of inflation and gives a more accurate picture of the true cost of borrowing or the real yield on an investment.

The Real Interest Rate Can Be Estimated by