The following data are for Macroland during 2010. The nominal GDP was $13.8 billion, the inflation rate was 3%, the nominal interest rate was 5.5%, and the nominal GDP growth rate was 1.5%. What was Macroland's real interest rate during 2010?
A) 8.5%
B) 2.5%
C) 4%
D) 4.5%

Question

Quizplus · Accepted Answer

The real interest rate can be calculated using the Fisher equation, which is real interest rate = nominal interest rate - inflation rate. Therefore, the real interest rate for Macroland in 2010 is 5.5% - 3% = 2.5%.

The Following Data Are for Macroland During 2010