The annual increase in the dollar value of a financial asset is called the __ while the annual increase in the purchasing power of a financial asset is called the _

Economics Feb 15, 2021

The annual increase in the dollar value of a financial asset is called the __________ while the annual increase in the purchasing power of a financial asset is called the _________

Expert Solution

The annual increase in the dollar value of a financial asset is called the Nominal Interest Rate while the annual increase in the purchasing power of a financial asset is called the Real Interest Rate. Real interest rate is annual percentage increase in the purchasing power of a financial asset. It is calculated by Nominal Interest rate minus Inflation.

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