A major difference between real and nominal returns is that_______________.

The correct answer is A. Real returns adjust for inflation and nominal returns do not.

Nominal returns are the actual returns on an investment, while real returns are the returns adjusted for inflation. Inflation is the rate at which prices for goods and services are rising. When inflation is high, nominal returns will be higher than real returns, because the value of money is decreasing. When inflation is low, nominal returns will be closer to real returns.

Option B is incorrect because real returns use actual cash

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