Which of the following is incorrect?
A)The nominal interest rate is the rate of interest expressed in terms of current dollars.
B)The real interest rate is the rate of interest expressed in terms of dollars of constant, or inflation-adjusted, value.
C)The nominal interest rate is the real interest rate less the rate of inflation.
D)During periods of inflation, the nominal interest rate will exceed the real interest rate.

Question

Quizplus · Accepted Answer

The nominal interest rate is actually the real interest rate plus the rate of inflation, not less. This is because the nominal rate reflects both the real return to the lender and the expected inflation over the period of the loan.

Which of the Following Is Incorrect