When the cost of borrowing funds that is stated on a loan is adjusted for the effects of inflation,the resulting interest rate is called the
A) prime interest rate.
B) nominal interest rate.
C) real interest rate.
D) core PCE interest rate.

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate adjusted for inflation, which reflects the actual cost of borrowing. The prime interest rate is the rate at which banks lend to their most creditworthy customers, while the core PCE interest rate is a measure of inflation used by the Federal Reserve.

When the Cost of Borrowing Funds That Is Stated on a Loan