The difference between the real rate of interest and the nominal rate (ignoring the cross-product term) is equal to the inflation premium.

Name: The difference between the real rate of interest and the nominal rate (ignoring the cross-product term) is equal to the inflation premium.
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Question

Quizplus · Accepted Answer

The Fisher equation explains that the nominal interest rate is equal to the real interest rate plus the inflation rate, which means the difference between the nominal rate and the real rate is indeed the inflation premium.

The Difference Between the Real Rate of Interest and the Nominal