ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Ex-ante interest rate is the real interest rate that is calculated before the actual rate of inflation is known. It is the interest rate quoted on loans and bonds, and it does not adjust for the rate of inflation.

Detailed explanation-2: -While the ex-post real rate is simply the difference between the nominal interest rate and actual inflation, the ex-ante real rate is defined as the difference between the nominal rate and the expected inflation rate.

Detailed explanation-3: -This leads to the concept of the real, or inflation-adjusted, interest rate. The real interest rate measures the percentage increase in purchasing power the lender receives when the borrower repays the loan with interest.. In our earlier example, the lender earned 8% or $8 on the $100 loan.

Detailed explanation-4: -The correct answer is (B) The real interest rate equals the nominal interest rate adjusted for inflation.

Detailed explanation-5: -Answer and Explanation: The correct answer is A. The interest rate that describes how well a lender has done in real terms after the fact is called the ex-post real interest rate. The ex-post real interest rates are the results realized at the end of a particular loan or debt.