Asked by
sabrina gonzalez
on Nov 11, 2024Verified
The nominal interest rate is equal to the real interest rate minus the anticipated inflation rate.
Nominal Interest Rate
The rate of interest charged on loans or paid on savings before adjusting for inflation, reflecting the face value rate.
Real Interest Rate
The interest rate adjusted for inflation, representing the true cost of borrowing or the true return on savings.
Anticipated Inflation
The rate of inflation that consumers and firms expect in the future, often based on past inflation rates and current economic conditions.
- Understand the relationship between nominal and real interest rates and inflation.
Verified Answer
AG
Learning Objectives
- Understand the relationship between nominal and real interest rates and inflation.