Question

Which is a true statement?

Answer 1

Answer:

O A real interest rate that is higher than current inflation is desirable,

Explanation:

The real rate is the nominal rate of interest after considering the inflation rate.  The nominal rate is the interest rate quoted by financial institutions.  It shows the percentage of return expected on a deposit or loan. The inflation rate communicates the rate at which prices are increasing in the economy.

The real rate is equivalent to the nominal minus the inflation rate. An ideal situation is when the real rate is higher than the inflation rate. In such a situation, the rate of money growth is higher than the price increases. It means the invested amount will increase in value. At the end of a period, the invested amounts will buy more goods and services than