S E35: Connecting Interest Rates & Output
Think Like An Economist
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The Federal Reserve Sets the Real Interest Rate
The real interest rate is set by the central bank. The federal reserve announces a nominal interest rate. Our actions are going to be based on real interest rates, because it's the real interest rate that represents the opportunity cost of money. But in day to day life, when, for example, i go to a bank to leave my money and a savings account, or if i want to take out a loan to buy a car, i don't get the interest rate set by the government. Yes, nows your rate imean.
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