The Real Interest Rate Is Defined by

question 63

Multiple Choice

The real interest rate is defined by

• A)The nominal interest rate plus the expected rate of inflation over the life of the asset.
• B)The discount rate plus the expected rate of inflation over the life of the asset.
• C)The nominal interest rate minus the expected rate of inflation over the life of the asset.
• D)The discount rate minus the expected rate of inflation over the life of the asset.

---

Definitions:

Quantity Theory of Money

A theory that relates the money supply to the price level and the rate of economic growth.

Money Supply

The sum of all financial assets, encompassing cash and deposits in banks, present within an economy at a given moment.

Price Level

An indicator that measures the typical prices for a comprehensive selection of goods and services within the economy.

Quantity Theory of Money

An economic theory that relates the money supply to the level of prices and the rate of inflation, proposing that changes in the money supply will directly affect price levels in the economy.