Suppose the expected inflation rate is 4 percent and the nominal interest rate is 9 percent.What is the expected real interest rate?
A) 13 percent
B) 9 percent
C) 5 percent
D) -5 percent

Question

Suppose the expected inflation rate is 4 percent and the nominal interest rate is 9 percent.What is the expected real interest rate?  
A) 13 percent 
B) 9 percent 
C) 5 percent 
D) -5 percent

Quizplus · Accepted Answer

The expected real interest rate is calculated as nominal interest rate minus the expected inflation rate. Therefore, the expected real interest rate in this case would be 9 percent - 4 percent, which is 5 percent.

Suppose the Expected Inflation Rate Is 4 Percent and the Nominal