If the nominal interest rate is 5 percent and the rate of inflation is 9 percent,then the real interest rate is
A)-4 percent.
B)-0.44 percent.
C)4 percent.
D)14 percent.

Question

Quizplus · Accepted Answer

The real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. In this case, the real interest rate would be:

Real interest rate = Nominal interest rate - Inflation rate
Real interest rate = 5% - 9%
Real interest rate = -4%

Therefore, the answer is A) -4 percent.

If the Nominal Interest Rate Is 5 Percent and the Rate