Question

2.You borrowed $1,500 for one year, and agreed to pay back $1,680. At the outset you expected the inflation rate to be 2% over the period of the loan, but it ended at 4%. In this case,

Question options:

	the nominal interest rate was 1.12%, the expected real interest rate was 2%, the actual real interest rate ended at 4%.
	the nominal interest rate was 12%, the expected real interest rate was 14%, the actual real interest rate was 16%.
	the nominal interest rate was 12%, the expected real interest rate was 10% the actual real interest rate was 8%.

3.Assume that the nominal interest rate is 3% while we have 5% deflation. In this situation, the real interest rate is:

Question options:

	-5%
	3%
	8%

Answer 1