Which of the following statement (s) is (are) true? a. The real rate of interest is determined by the supply and demand for funds. b. The real rate of interest is determined by the expected rate of inflation. c. The real rate of interest can be affected by actions of the Fed. d. The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.

Question

Business

Ellie Mcclure

16 December, 11:26

Which of the following statement (s) is (are) true? a. The real rate of interest is determined by the supply and demand for funds. b. The real rate of interest is determined by the expected rate of inflation. c. The real rate of interest can be affected by actions of the Fed. d. The real rate of interest is equal to the nominal interest rate plus the expected rate of inflation.

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Answers (1)

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Jazlynn Welch · Answer 1

The correct answers are letter "A" and "C": The real rate of interest is determined by the supply and demand for funds; The real rate of interest can be affected by actions of the Fed.

Explanation:

An interest rate is the cost of borrowing money, expressed as a percentage of the loan amount. Because of inflation, the purchasing power of every dollar lent out to an individual or a business tends to decrease over time. There is when the real interest rate comes into play. The real interest rate is affected but different factors such as the demand and supply of money in the economy, international major problems, and regulations of the Federal Government.