If the bank agrees to make a loan at a 7% interest rate and the inflation rate is 3%, then 4% is the ______ rate.
A)nominal interest
B)real interest
C)hyperinflation
D)disinflation

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the inflation rate. In this case, the nominal interest rate is 7% and the inflation rate is 3%, so the real interest rate is 4%.

If the Bank Agrees to Make a Loan at a 7