Question

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then what is the inflation rate?

Answer 1

The inflation rate can be determined by subtracting the real interest rate from the nominal interest rate. In this case, the inflation rate is -2%.

Step-by-step explanation:

The inflation rate can be determined by subtracting the real interest rate from the nominal interest rate. In this case, the nominal interest rate is 5 percent and the real interest rate is 7 percent. Therefore, the inflation rate can be calculated as:

Inflation rate = Nominal interest rate - Real interest rate
= 5% - 7%
= -2%

So, the inflation rate is -2%.