Asked by Tharchin Sangpo on Jul 02, 2024
Verified
The real interest rate tells you how fast the purchasing power of your bank account rises over time.
Real Interest Rate
The nominal interest rate adjusted for inflation, reflecting the true cost of borrowing and the true yield on investments.
Purchasing Power
The ability of an individual or group to buy goods or services with a given amount of money or currency.
- Understand the definitions and implications of real and nominal interest rates.
Verified Answer
PG
Palesa Goitseone7 days ago
Final Answer :
True
Explanation :
The real interest rate adjusts the nominal interest rate (the stated interest rate) for the effects of inflation, thus reflecting the actual increase in purchasing power that an account or investment gains over time.
Learning Objectives
- Understand the definitions and implications of real and nominal interest rates.