Answer to Question #299387 in Macroeconomics for Prit

Question #299387

Zimmerland has following data is known

Nominal interest rates in 2015 = 2.5 %

CP|2015 = 165

CP|2014 = 150

What is the real interest rate in 2015?

Expert's answer

The inflation rate is:

pi = (165 - 150)/150×100% = 10%.

The real interest rate in 2015 is:

r = i - pi = 2.5 - 10 = -7.5%.

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