The dominant factor why the nominal interest rate differs among nations is that ________ differs among nations.
A) potential GDP
B) the unemployment rate
C) inflation rate
D) the price level
E) the quantity of money

Question

Quizplus · Accepted Answer

The nominal interest rate is mainly determined by the inflation rate because it represents the rate of return adjusted for the change in purchasing power due to inflation. Higher inflation rates result in higher nominal interest rates to compensate for the loss of purchasing power over time. Therefore, the inflation rate is the dominant factor that affects the nominal interest rate in different countries.

The Dominant Factor Why the Nominal Interest Rate Differs Among