Question

In words, the real rate of interest is approximately equal to 0 the nominal rate minus the inflation rate. O the inflation rate divided by the nominal rate. O the nominal rate plus the inflation rate. O the nominal rate times the inflation rate. O the inflation rate minus the nominal rate.

Answer 1

Hello Sir/ Mam

YOUR REQUIRED ANSWER IS OPTION A : THE NOMINAL RATE MINUS THE INFLATION RATE

Real Interest Rate refers to the interest rate adjusted for inflation.

Hence, adjusting inflation from nominal rate,

Real Interest Rate = Nominal Interest Rate - Inflation

I hope this solves your doubt.

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