Real interest rates are
A)procyclical, just like nominal interest rates.
B)acyclical, while nominal interest rates are procyclical.
C)acyclical, just like nominal interest rates.
D)countercyclical, while nominal interest rates are procyclical.

Question

Quizplus · Accepted Answer

Real interest rates are calculated by subtracting inflation from nominal interest rates. As inflation and economic activity tend to move together, nominal interest rates are often procyclical. However, real interest rates are acyclical because they adjust for changes in inflation and are less influenced by short-term changes in economic activity. Therefore, option B is the correct answer.

Real Interest Rates Are