Respuesta :
Answer:
B) Increased purchasing power
Explanation:
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Detailed Explanation:
A real interest rate is adjusted to remove the effects of inflation and gives the real rate of a bond or loan.
A nominal interest rate refers to the interest rate before taking inflation into account.
Taking this into account it is clear that the relationship provides an increased spending power.
Increased purchasing power, is the relationship between a higher nominal rate and a lower real interest rate.
What is the relationship between a higher nominal rate and a lower real interest rate?
- Real interest rates are negative when the rate of inflation is higher than the nominal interest rate. Nominal interest rates cannot be negative because if banks charged a negative nominal interest rate, they would be paying you to borrow money.
- When nominal interest rates are higher than inflation rates, real interest rates are positive. When nominal interest rates are lower than inflation rates, real interest rates are negative. This is important to understand when looking at interest rates on investments in comparison to current inflation rates.
Increased purchasing power, is the relationship between a higher nominal rate and a lower real interest rate.
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