The difference between the nominal interest rate and the rate of inflation is known as the _____.
A)prime rate
B)real interest rate
C)discount rate
D)federal funds rate
E)exchange rate

Question

Quizplus · Accepted Answer

The difference between the nominal interest rate and the rate of inflation is known as the real interest rate. This is because it represents the actual purchasing power gained or lost through interest earned on an investment, once inflation has been accounted for. The other options listed are all specific interest rates used in various contexts, but none represent the difference between nominal interest rates and inflation.

The Difference Between the Nominal Interest Rate and the Rate