When the inflation rate is 3 percent and the nominal interest rate is 5 percent, the real interest rate is
A) 2 percent.
B) 8 percent.
C) 0.6 percent.
D) 1.6 percent.
E) 7 percent.

Name: When the inflation rate is 3 percent and the nominal interest rate is 5 percent, the real interest rate is A) 2 percent. B) 8 percent. C) 0.6 percent. D) 1.6 percent. E) 7 percent.
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Question

Quizplus · Accepted Answer

The real interest rate can be approximated by subtracting the inflation rate from the nominal interest rate: 5% - 3% = 2%.

When the Inflation Rate Is 3 Percent and the Nominal