Interest Rates and International Capital Flows
AP Macroeconomics · Flashcards · Application
AP MACROECONOMICS · FLASHCARDS
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QUESTION
Find the nominal interest rate: Real Rate = 4%, Inflation Rate = 1.5%.
QUESTION
Find the real interest rate: Nominal Rate = 5%, Inflation Rate = 3%.
QUESTION
Find the nominal interest rate: Real Rate = 4%, Inflation Rate = 1.5%.
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ANSWER
Nominal Interest Rate = 5.5%. Apply Fisher equation:
4
%
+
1.5
%
=
5.5
%
4\% + 1.5\% = 5.5\%
4%
+
1.5%
=
5.5%
.
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