If the borrower and lender agree to a loan at 8% when the inflation rate is 3%,then 8% is the ________ interest rates and 5% is the _________ interest rate.

Name: If the borrower and lender agree to a loan at 8% when the inflation rate is 3%,then 8% is the ________ interest rates and 5% is the _________ interest rate.
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Question

Quizplus · Accepted Answer

The nominal interest rate is the stated rate (8%), while the real interest rate is the nominal rate minus inflation (8% - 3% = 5%).

If the Borrower and Lender Agree to a Loan at 8