If the nominal interest rate is 6.3 percent and the inflation rate is 7.2 percent, then the real interest rate equals:
A)- 13.5 percent.
B)+ 13.5 percent.
C)- 0.9 percent.
D)-7.2 percent.
E)+ 1.1 percent.

Question

Quizplus · Accepted Answer

The real interest rate is calculated as nominal interest rate minus inflation rate. Therefore: 
Real interest rate = 6.3% - 7.2% = -0.9% 
The minus sign indicates that the real interest rate is negative, which means that the inflation rate is higher than the nominal interest rate.

If the Nominal Interest Rate Is 6