The nominal rate of interest in Russia is 9.5% and the inflation rate is 8%. The nominal rate of interest in Spain is 3% and the inflation rate is 1%. Which country has the higher real rate of interest?

Question

Quizplus · Accepted Answer

Spain has a higher real rate of interest. The real rate of interest can be roughly calculated as the nominal rate minus the inflation rate. For Russia, it's 9.5% - 8% = 1.5%. For Spain, it's 3% - 1% = 2%. Therefore, Spain has the higher real rate of interest.

The Nominal Rate of Interest in Russia Is 9