The significance of the real rate of return in determining the shape of the term structure of interest rates can vary based on different economic contexts, but generally, we can analyze the options as follows:
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Not very significant - This may not accurately reflect the role of real interest rates in influencing the term structure, as they are a key component.
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Very significant - This option is likely accurate, as real rates can significantly influence the yield curve by affecting investor expectations about future economic conditions.
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Less significant than inflation - This could be true in some contexts, as inflation expectations often have a profound impact on nominal interest rates and consequently on the term structure.
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More significant than inflation - This is less likely to be the case in most situations since inflation is a critical factor that affects nominal interest rates, which are more directly seen in the term structure.
Based on this analysis, the most appropriate selections would be:
- Very significant (real rates play a crucial role)
- Less significant than inflation (inflation often has more immediate impact on nominal rates which shape the term structure)
Therefore, the real rate of return is very significant, but its significance can be viewed as less significant than inflation in terms of direct impact on nominal interest rates and the shape of the yield curve.