If the nominal interest rate is 8 percent and inflation is 3 percent, what is the real interest rate?
A) 3 percent
B) 5 percent
C) 11 percent
D) 8 percent

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. Therefore, the real interest rate in this scenario is 5 percent (8 percent - 3 percent = 5 percent).

If the Nominal Interest Rate Is 8 Percent and Inflation