The real interest rate is calculated as the
A) expected rate of inflation divided by the nominal interest rate
B) real GDP plus the expected rate of inflation
C) nominal interest rate minus real GDP
D) nominal interest rate minus the expected rate of inflation
E) real GDP multiplied by the expected rate of inflation

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the expected rate of inflation from the nominal interest rate. This gives us the rate of return adjusted for changes in the purchasing power of money due to inflation.

The Real Interest Rate Is Calculated as the