Final answer:
According to the Fisher equation, when the nominal interest rate and the real interest rate both equal to 7%, we know that the rate of inflation is 0%.
Step-by-step explanation:
According to the Fisher equation, when the nominal interest rate and the real interest rate both equal to 7%, we know that the rate of inflation is 0%. This is because the real interest rate is the nominal interest rate minus the rate of inflation. When both rates are equal, it indicates that there is no inflation or deflation, and the borrower is effectively paying a 7% real interest rate.