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QUESTION:
If the nominal interest rate is 4 percent and the inflation rate is 2 percent, then the real interest rate is _______.

ANSWER:

Given:

  • Nominal Interest Rate = 4%
  • Inflation Rate = 2%

Substitute these values into the formula:

Real Interest Rate=4%−2%=2%\text{Real Interest Rate} = 4\% - 2\% = 2\%

Final Answer:

b. 2 percent


Posted by Cleveland on September 9, 2024
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