According to the Fisher equation,if a bank extends a loan for 3 percent and the inflation rate ends up being 2 percent,the ________ interest rate is ________ percent.
A) nominal; 1
B) real; 1
C) nominal; -1
D) real; -1
E) nominal; 5

Question

Quizplus · Accepted Answer

The real interest rate is the nominal interest rate minus the inflation rate. In this case, the nominal interest rate is 3% and the inflation rate is 2%, so the real interest rate is 1%.

According to the Fisher Equation,if a Bank Extends a Loan