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Degger [83]
3 years ago
15

Hodor borrowed $1000. The bank charges him 5% interest per year. At the end of year, he paid $50 in interest. There was 2% incre

ase in the GDP deflator. Nominal interest rate?
Business
1 answer:
dem82 [27]3 years ago
5 0

Answer:

5%

Explanation:

nominal interest rate = 5%

real interest rate = nominal interest rate -  increase in GDP deflator (inflation rate) = 5% - 2% = 3%

The nominal interest rate is the interest rate earned or charged without considering the effects of inflation. The real interest rate adjusts the nominal interest rate against the year's inflation rate.

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2 years ago
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