If the nominal interest rate is 6 percent and the rate of inflation is 10 percent,then the real interest rate is
A)-16 percent.
B)-4 percent.
C)4 percent.
D)16 percent.

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the rate of inflation from the nominal interest rate. So, real interest rate = nominal interest rate - inflation rate. 
In this case, real interest rate = 6% - 10% = -4%. 
Since the real interest rate is negative, it means that the inflation rate is higher than the nominal interest rate, indicating that the purchasing power of the money is decreasing over time. So, the correct answer is option B.

If the Nominal Interest Rate Is 6 Percent and the Rate