If the borrower and lender agree to a loan at 8% when the inflation rate 3%, then 8% is the ________ interest rate and 5% is the _________ interest rate.

Question

If the borrower and lender agree to a loan at 8% when the inflation rate 3%, then 8% is the ________ interest rate and 5% is the _________ interest rate.
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Solution 1

8% is the nominal interest rate and 5% is the real interest rate.

Here's why:

  1. The nominal interest rate is the rate of interest before adjustment for inflation. In this case, the borrower and lender agreed to a loan at 8%, so 8% is the nominal interest rate.

  2. The real interest rate is the r Knowee AI StudyGPT is a powerful AI-powered study tool designed to help you to solve study prob

Knowee AI StudyGPT is a powerful AI-powered study tool designed to help you to solve study problem.
Knowee AI StudyGPT is a powerful AI-powered study tool designed to help you to solve study problem.
Knowee AI StudyGPT is a powerful AI-powered study tool designed to help you to solve study problem.
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