Americans viewed the 12 percent mortgage interest rates of the 1980s as exorbitantly high while they considered the 7 percent mortgage interest rates of the late 1990s as reasonable.This represents a confusion of

Question

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The confusion in this scenario is between real versus nominal interest rates. In the 1980s, inflation was high, making the nominal interest rates higher, but in the late 1990s, inflation was lower, making the nominal interest rates lower. However, when discussing the affordability of mortgage payments, it is important to consider the inflation-adjusted or real interest rates, which take into account the impact of inflation on the cost of borrowing.

Americans Viewed the 12 Percent Mortgage Interest Rates of the 1980s