Question

If nominal interest rates are 8% and there's a 3% inflation, what would you expect to to be the real growth of a bank account continue $1000?

Answer 1

$50

Step-by-step explanation:

The real rate of interest is the nominal interest rate adjusted for inflation.

I.e., real rate = nominal rate - inflation rate

real rate = 8% - 3%

=5%

The real growth of $1000 will be

=5/100 x 1000

=$50

Real growth will be by $50