Question

The ex post real interest rate will be greater than the ex ante real interest rate when the: A) rate of inflation is increasing. B) rate of inflation is decreasing. C) actual rate of inflation is greater than the expected rate of inflation. D) actual rate of inflation is less than the expected rate of inflation.

Answer 1

Answer:

C. actual rate of inflation is greater than the expected rate of inflation.

Explanation:

Ex post real interest rate is the interest rate that comes in after the fact, also know as realized return, While the Ex ante real interest rate is the expected return or anticipated interest after the fact. Ex post real interest rate would be greater with increasing inflation because money given out increase with inflation when the interest returns.