Question

37. Which of the following describes the rate at which your ability to purchase grows while you hold an interest-earning investment?

A. The nominal exchange rate
B. The nominal interest rate
C. The real exchange rate
D. The real interest rate

Answer 1

The rate at which your ability to purchase grows while you hold an interest-earning investment is described by the real interest rate.

Step-by-step explanation:

The correct answer is D. The real interest rate.

The rate at which your ability to purchase grows while you hold an interest-earning investment is described by the real interest rate. The real interest rate takes into account the nominal interest rate and adjusts for the rate of inflation. It represents the true increase in purchasing power over time.