Question

Which statement is true?
A bank interest lower than inflation means more purchasing power.
Nominal rates are an accurate figure of purchasing power.
Real interest measures the power of the saved money
Real interest is the rate quoted in loan and deposit agreements.

Answer 1

Answer:

Nominal rates are an accurate figure of purchasing power.

Answer 2

The statement nominal rates are an accurate figure of purchasing power can be marked as true. Thus, the correct option is B). Nominal rates are an accurate figure of purchasing power.

What is nominal interest rate?

Nominal interest rate refers to the interest rate before taking inflation into account. It is also refer to the interest rate on a loan that is charged without taking into account any fees or compounding of interest.

The nominal rate of interest is often used in banks to describe the interest on different loans and in the investment field as well. The higher the nominal rate, the more interest will be earned on savings.

Basically, the nominal interest rate is approximately equal to the real interest rate plus the inflation rate that can be depicts as (i = R + h).

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