The real return on an investment is defined as the nominal return minus the inflation rate. Which option best reflects this concept?

• A. Real return
• B. Nominal return
• C. Inflation-adjusted return
• D. Purchasing power gain

Answer: (A)

When you want to know how much your investment truly grows in purchasing power, you look at the return after removing inflation. Subtracting the inflation rate from the nominal return yields the real return—the increase in purchasing power you actually get. This is the standard label for that concept. Nominal return is just the raw money gain before inflation, so it can overstate growth when inflation is positive. Inflation-adjusted return describes the same idea, but real return is the conventional name. Purchasing power gain describes the outcome, not the official name of the measure.