Which one of the following is correct concerning real interest rates?
A) Real interest rates are constant.
B) Real interest rates must be positive.
C) Real interest rates must be less than nominal interest rates.
D) Real interest rates, if positive, increase purchasing power over time.

Question

Quizplus · Accepted Answer

Real interest rates, if positive, increase purchasing power over time. This means that if the real interest rate is positive, the value of money invested will increase over time, as the invested funds will earn interest that is higher than the rate of inflation.

Which One of the Following Is Correct Concerning Real Interest