What is the real interest rate if the nominal interest rate is 7 percent and the expected inflation rate is 7 percent?
A) 0 percent
B) 4 percent
C) -4 percent
D) 10 percent
E) 5 percent

Question

Quizplus · Accepted Answer

The real interest rate can be approximated by subtracting the expected inflation rate from the nominal interest rate. Therefore, if the nominal interest rate is 7 percent and the expected inflation rate is also 7 percent, the real interest rate is 0 percent (7% - 7% = 0%).

What Is the Real Interest Rate If the Nominal Interest