If the nominal interest rate is 7 percent and the inflation rate is 3 percent, then the real interest rate is ?
Correct answer: A. 4 percent
- A. 4 percent
- B. 10 percent
- C. -4 percent
- D. 3 percent
- E. 21 percent
Explanation
Using the approximate Fisher equation, subtract inflation from the nominal rate: 7% minus 3% equals a real interest rate of 4%.
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