Asked by Hussain Khudair on Jul 21, 2024
Verified
If the nominal interest rate is 8.3% and the inflation rate is 4.4%, what is the real interest rate?
Nominal Interest Rate
The percentage increase in money that borrowers pay to lenders, not adjusted for inflation.
Real Interest Rate
The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to savers and investors.
Inflation Rate
The rate expressed in percentage terms showing the increase in prices for goods and services, leading to a reduction in buying power.
- Gain an understanding of how to evaluate the inflation rate with the assistance of real and nominal interest rates.
Verified Answer
SP
Learning Objectives
- Gain an understanding of how to evaluate the inflation rate with the assistance of real and nominal interest rates.