How is the real interest rate determined?

Question

Quizplus · Accepted Answer

The real interest rate is determined by subtracting the rate of inflation from the nominal interest rate. This is because the nominal interest rate is the rate at which your money grows in a given period, while the rate of inflation represents the decrease in purchasing power over that same period. Therefore, to determine how much your money is actually growing in real terms, you need to adjust for the impact of inflation by subtracting it from the nominal interest rate.

How Is the Real Interest Rate Determined