Which of the following approximately describes the relationship between the nominal and real interest rate?
A) r $\approx $ R - i
B) R $\approx $ r - i
C) R $\approx $ r + $ \frac{i}{2} $
D) r $\approx $ R + i
E) r - R $\approx $ i

Question

Quizplus · Accepted Answer

The real interest rate (r) is approximately equal to the nominal interest rate (R) minus the inflation rate (i), which is expressed as r ≈ R - i. This is known as the Fisher equation.

Which of the Following Approximately Describes the Relationship Between the Nominal