If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate equals:
A)3 percent.
B)5 percent.
C)8 percent.
D)11 percent.

Question

If the nominal interest rate is 8 percent and the inflation rate is 3 percent, then the real interest rate equals:
A)3 percent.
B)5 percent.
C)8 percent.
D)11 percent.

Quizplus · Accepted Answer

The real interest rate = the nominal interest rate - the inflation rate. So to find the real interest rate, subtract the inflation rate from the nominal interest rate.

If the Nominal Interest Rate Is 8 Percent and the Inflation