Question

All of the following are true of the real interest rate except it Is equal to the nominal interest rate minus the anticipated rate of inflation. Is stabilized by ARMs. Is the inflation-adjusted rate of interest. Equals the foreign exchange rate minus the inflation rate.

Answer 1

Answer:

Equals the foreign exchange rate minus the inflation rate.

Explanation:

Nominal rate of interest refers to the interest rate which does not account for rate of inflation.

It is expressed as

Nominal interest rate = Real interest rate + rate of inflation

Real interest rate is considered to be a better measure since it is adjusted for rate of inflation.

Foreign exchange rate refers to exchange rate between two currencies which is based upon inflation and interest rates prevailing in the respective countries.