The real rate of interest is the compensation paid by the borrower of funds to the lender. From the borrower's point of view, the real rate represents the cost of borrowing funds.

Question

Quizplus · Accepted Answer

The real rate of interest is the nominal interest rate adjusted for inflation, representing the true cost of borrowing in terms of purchasing power, not just the compensation paid.

The Real Rate of Interest Is the Compensation Paid by the Borrower