Question

If the inflation rate is equal to the nominal interest rate, the real interest rate is?

negative.
zero.
either positive or zero.
positive.

Answer 1

Answer: zero

Step-by-step explanation:

It should be noted that real interest rate is the equal to the nominal interest rate after the inflation rate has been deducted.

Real Interest rate = Nominal rate - Inflation rate

For example let's say the nominal Interest rate and the inflation rate are both 5%, then the real interest rate will be:

Real Interest rate = Nominal rate - Inflation rate

Real interest rate = 5% - 5% = 0