ECONOMICS
GDP
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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5%
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10%
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0%
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none of the above.
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Detailed explanation-1: -If the nominal interest rate is 5 percent and the inflation rate is 2 percent, then the real interest rate is 7 percent.
Detailed explanation-2: -If the nominal interest rate is 5% and the inflation rate is 4%, this means the real interest rate is 9%.
Detailed explanation-3: -According to the Fisher effect, if inflation rises then the nominal interest rate rises. If the real interest rate is 5% and the inflation rate is 3%, then the nominal interest rate is 8%. Inflation induces people to spend more resources maintaining lower money holdings.
Detailed explanation-4: -Nominal Interest Rate If the nominal rate on a loan is 5%, borrowers can expect to pay $5 of interest for every $100 loaned to them. This is often referred to as the coupon rate because it was traditionally stamped on the coupons redeemed by bondholders.