According to the Fisher equation,if a bank extends a loan for 3% and the inflation rate ends up being 2%,the:

Question

Quizplus · Accepted Answer

The Fisher equation states that the nominal interest rate equals the real interest rate plus the expected inflation rate. Rearranging the equation, we get that the real interest rate equals the nominal interest rate minus the expected inflation rate. So in this case, the real interest rate would be 3% - 2% = 1%, making choice B the correct answer.

According to the Fisher Equation,if a Bank Extends a Loan