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What is the real interest rate for a savings account that has a nominal interest rate of 1% when the rate of inflation is 1%?

a. -2%
b. 0%
c. 1%
d. 2%

1 Answer

2 votes

Final answer:

The real interest rate is calculated by subtracting the rate of inflation from the nominal interest rate, giving a result of 0% when both are 1%.

Step-by-step explanation:

The real interest rate can be calculated by subtracting the rate of inflation from the nominal interest rate. In this scenario, if the nominal interest rate is 1% and the rate of inflation is also 1%, the real interest rate would be:

Real interest rate = Nominal interest rate - Inflation rate
= 1% - 1% = 0%

Therefore, the real interest rate for a savings account that has a nominal interest rate of 1% when the rate of inflation is also 1% would be 0%, which corresponds to option b. 0%

User Hardik Solanki
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