What is the difference between real interest rate and nominal rate i Real interest rates take into a...........

Finance (RBI) Reserve Bank of India

What is the difference between real interest rate and nominal rate?

i) Real interest rates take into account inflation

ii) Nominal rates are those which apply only to borrowers and not lenders

Only i

Only ii

Both i and ii

None of the above

Real Interest Rates are nominal rates adjusted for inflation. In case the nominal rates are 4% and inflation is 3%, the real rate is only 1 %

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