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) $r - R \approx i$
D) $r \approx R + i$
E) $R \approx r + \frac { i } { 2 }$

Question

Quizplus · Accepted Answer

The relationship between the nominal interest rate (R), real interest rate (r), and inflation rate (i) is given by the Fisher equation, which is approximately $r \approx R - i$. This equation shows that the real interest rate is the nominal interest rate adjusted for inflation.

Which of the Following Approximately Describes the Relationship Between the Nominal