Suppose the nominal interest rate is 4% and the inflation rate is 5%.The real interest rate is:
A) 9%.
B) 0%.
C) 1%.
D) -1%.

Name: Suppose the nominal interest rate is 4% and the inflation rate is 5%.The real interest rate is: A) 9%. B) 0%. C) 1%. D) -1%.
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Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. Therefore, real interest rate = Nominal Interest Rate - Inflation Rate = 4% - 5% = -1%. Hence, the answer is D.

Suppose the Nominal Interest Rate Is 4% and the Inflation