All AP Macroeconomics Resources
Example Questions
Example Question #1 : Real Interest Rate
The real interest rate can be approximated by the Fisher equation:
What is the exact formula for the real interest rate?
Possible Answers:
The Fisher equation always gives the exact real interest rate.
Correct answer:
Explanation:
The real interest rate is defined as the nominal appreciated value of assets divided by the new price level of the assets. The nominal appreciated value is simply , while the new price level is equal to
. This gives the real appreciated value of assets. We then subtract 1 to get the real interest rate.
Example: (according to the Fisher equation)
The Fisher equation comes close, but is not actually correct.
Julia
Certified Tutor
Certified Tutor
Utah State University, Bachelor in Arts, History. University of Utah, Masters in Education, Social Science Teacher Education.
All AP Macroeconomics Resources
Popular Subjects
Algebra Tutors in Seattle, Reading Tutors in Los Angeles, Algebra Tutors in Boston, Math Tutors in Los Angeles, ACT Tutors in Houston, French Tutors in Houston, Statistics Tutors in Dallas Fort Worth, Reading Tutors in Atlanta, ISEE Tutors in Philadelphia, SAT Tutors in Dallas Fort Worth
Popular Courses & Classes
ACT Courses & Classes in Boston, GMAT Courses & Classes in Boston, LSAT Courses & Classes in Miami, SAT Courses & Classes in Chicago, GMAT Courses & Classes in Philadelphia, GMAT Courses & Classes in New York City, GRE Courses & Classes in Houston, GMAT Courses & Classes in Seattle, SAT Courses & Classes in Boston, ISEE Courses & Classes in Boston
Popular Test Prep
SAT Test Prep in Phoenix, LSAT Test Prep in Dallas Fort Worth, LSAT Test Prep in Chicago, GRE Test Prep in Houston, ACT Test Prep in Boston, GMAT Test Prep in San Francisco-Bay Area, GMAT Test Prep in Boston, ISEE Test Prep in Dallas Fort Worth, GMAT Test Prep in New York City, GMAT Test Prep in Philadelphia
