Question

If the money growth is 4% and the increase in GDP is 2%. Given a nominal interest rate of 5% ,Find the real interest rate.

Answer 1

The real interest rate is 1%.

Step-by-step explanation:

The real interest rate is calculated by subtracting the rate of inflation from the nominal interest rate. In this case, the nominal interest rate is 5% and the rate of inflation is 4%. Therefore, the real interest rate is 1%.