Whitney puts money in a savings account at her bank earning 3.5 percent.One year later she takes her money out and notes that while her money was earning interest,prices rose 1.5 percent.Whitney earned a nominal interest rate of

Question

Quizplus · Accepted Answer

The nominal interest rate is the rate at which money grows without taking inflation into consideration. Thus, Whitney's nominal interest rate is 3.5%. 
The real interest rate is the rate at which the purchasing power of money increases. To calculate the real interest rate, we need to subtract the inflation rate from the nominal interest rate. 
Thus, Whitney's real interest rate is 3.5% - 1.5% = 2%. Therefore, option B is the correct answer.

Whitney Puts Money in a Savings Account at Her Bank