The nominal interest rate:
A) is set by Congress.
B) is equal to the rate of inflation.
C) always is equal to the 10-year bond rate of return.
D) is the opportunity cost of holding money.
E) is constant.

Question

Quizplus · Accepted Answer

The nominal interest rate represents the opportunity cost of holding money, as it reflects the return that could be earned by investing that money elsewhere. It is not set by Congress, nor is it always equal to the rate of inflation or the 10-year bond rate of return. The nominal interest rate can vary over time and is not constant.

The Nominal Interest Rate