Question

(I) The real interest rate: A. is the interest rate that is quoted on a financial debt and a​ firm's assets. B. is equal to the nominal interest rate minus the inflation rate. C. is equal to the inflation rate minus the nominal interest rate. D. is the interest rate that adjusts GDP for changes in prices.

(II) Suppose an economy has an inflation rate of 2.5​% and a bank makes a loan with an interest rate of 5.9​%. In this​ case, the real interest rate is nothing​%. ​(Enter your response rounded to one decimal​ place.)

Answer 1

B. is equal to the nominal interest rate minus the inflation rate

(II) 3.4% simplify method

3.317% fisher formula

Step-by-step explanation:

5.9 - 2.5 = 3.4 real rate

or using fisher formula

`(1+rate)/(1+inflation) - 1 = $real rate`

1.059/1.025 - 1= 3.317 real rate