If the nominal interest rate is 8 percent and expected inflation rate is 9 percent, the real interest rate

Name: If the nominal interest rate is 8 percent and expected inflation rate is 9 percent, the real interest rate
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Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the expected inflation rate from the nominal interest rate. In this case, 8% - 9% = -1%. This means that the purchasing power of the money invested will decrease by 1% over the course of the year, making the real interest rate -1%.

If the Nominal Interest Rate Is 8 Percent and Expected