The Gap Between the Real and Nominal Interest Rate Represents

question 79

Multiple Choice

The gap between the real and nominal interest rate represents

• A) the inflationary premium.
• B) the time preference.
• C) the difference from what the lender receives and the borrower pays.
• D) consumption smoothing.
• E) a surplus of loanable funds.

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Definitions:

U.S. Government Securities

Financial instruments issued by the United States Department of the Treasury to fund federal government spending.

Federal Open Market Committee

The branch of the Federal Reserve System responsible for setting monetary policy, including the manipulation of interest rates and the money supply.

Federal Reserve Banks

The regional banks that make up the Federal Reserve System, the central banking system of the United States, responsible for implementing monetary policy, supervising and regulating banks, and providing financial services.

Federal Reserve Bank Presidents

Leaders of the twelve regional Federal Reserve Banks in the United States, playing key roles in monetary policy decisions.