The difference between nominal and real interest rates is that
A) nominal interest rates are measured in terms of a country's output, while real interest rates are measured in monetary terms.
B) nominal interest rates are measured in monetary terms, while real interest rates are measured in terms of a country's output.
C) nominal interest rates can fluctuate, while real interest rates always remain fixed.
D) real interest rates can fluctuate, while nominal interest rates always remain fixed.
E) real interest rates are the same in every country, while nominal interest rates are different for every country.

Question

Quizplus · Accepted Answer

Nominal interest rates are the rates that are quoted by lenders and borrowers, and they are measured in monetary terms. Real interest rates, on the other hand, take into account the effects of inflation on the purchasing power of money, and they are measured in terms of a country's output. Therefore, the correct answer is B: nominal interest rates are measured in monetary terms, while real interest rates are measured in terms of a country's output.

The Difference Between Nominal and Real Interest Rates Is That