Question

If the nominal interest rate is 4 percent and the inflation rate is 2 percent, then the real interest rate is _______.

1) -2 percent
2) 2 percent
3) 6 percent
4) 8 percent
5) 10 percent

Answer 1

The real interest rate can be calculated by subtracting the inflation rate from the nominal interest rate. In this case, it is 2 percent.

Step-by-step explanation:

The real interest rate can be calculated by subtracting the inflation rate from the nominal interest rate. In this case, the nominal interest rate is 4% and the inflation rate is 2%. So, the real interest rate would be 4% - 2% = 2%. Therefore, the correct answer is option 2) 2 percent.