Asked by
Bryan Dominguez
on Nov 16, 2024
Verified
If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.
Real Interest Rate
The interest rate, once revised for inflation, to represent the actual borrowing cost or the real savings yield.
Inflation Rate
The measure of how rapidly the general price point of goods and services escalates, which in turn diminishes the power to buy.
- Study the association of nominal interest rates with real interest rates and inflation rates.
Verified Answer
CM
Learning Objectives
- Study the association of nominal interest rates with real interest rates and inflation rates.