When the Inflation Rate Is Positive, the

question 183

Multiple Choice

When the inflation rate is positive, the

• A) real interest rate equals the nominal interest rate.
• B) real interest rate is less than the nominal interest rate.
• C) nominal interest rate is zero.
• D) real interest rate is greater than the nominal interest rate.

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Definitions:

Rate of Return

The gain or loss of an investment over a specified period, expressed as a percentage of the investment’s initial cost.

Compounded Monthly

Refers to the process of adding interest to the principal sum of a loan or deposit on a monthly basis, where the added interest also earns interest from then on.

Savings Plans

Financial programs that allow individuals to set aside money for future use, often with tax advantages or interest benefits.

Accumulated Funds

Total funds or capital that has been gathered or saved up over a period, often referring to the sum of earnings, savings, or investments.