The __________________ is the nominal interest rate minus the rate of inflation. real GDP real interest rate nominally adjusted annualized interest rate
Added by Ellen N.
Step 1
Step 1: Identify the components given in the question: - Nominal interest rate: 2% - Inflation rate: 1% Show more…
Show all steps
Your feedback will help us improve your experience
Crystal Wang and 95 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
If expected inflation is constant, then when the nominal interest rate increases, the real interest rate increases by more than the change in the nominal interest rate. increases by the change in the nominal interest rate. decreases by the change in the nominal interest rate. decreases by more than the change in the nominal interest rate.
Jennifer S.
If the nominal interest rate is 6% and the inflation rate is 2% then the real interest rate is:
Chandra J.
The interest rate stated by a financial institution is sometimes called the nominal rate. If interest is compounded, the actual rate is, in general, higher than the nominal rate, and is called the effective rate. If $r$ is the nominal rate and $n$ is the number of times interest is compounded annually, then $$R=\left(1+\frac{r}{n}\right)^{n}-1$$ is the effective rate. Here, $R$ represents the annual rate that the investment would earn if simple interest were paid. Find the effective rate to the nearest hundredth of a percent if the nominal rate is $3 \%$ and interest is compounded quarterly.
Inverse, Exponential, and Logarithmic Functions
Further Applications and Modeling with Exponential and Logarithmic Functions
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
18,000,000+
Students on Numerade
Trusted by students at 8,000+ universities
Watch the video solution with this free unlock.
EMAIL
PASSWORD