Which of the following statements is true?
A)The difference between a nominal interest rate and the rate of inflation is called the spread.
B)The difference between a nominal interest rate and the rate of inflation is called the interest rate spread.
C)The difference between a nominal interest rate and the rate of inflation is called the accumulated interest rate.
D)The difference between a nominal interest rate and the rate of inflation is called the real interest rate.

Question

Quizplus · Accepted Answer

The difference between a nominal interest rate and the rate of inflation is called the real interest rate. This is because it represents the actual increase in purchasing power that an individual could expect to receive from an investment after accounting for inflation. Choice A and B are similar but not the correct terminology. Choice C is incorrect as it does not accurately describe the relationship between nominal interest rates and inflation.

Which of the Following Statements Is True