Real vs. Nominal Interest Rates and Changes in Prices


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question 1 of 3

In order to adjust a nominal interest rate for inflation, which of the following formula should be used?

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1. Which of the following is FALSE regarding real interest rates?

2. In the country of Athenia, banks charge 10% interest on all loans. If the general price level has been increasing at a rate of 2% per year, what is the real rate of interest in Athenia?

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About This Quiz & Worksheet

This quiz and worksheet will gauge your knowledge of real versus nominal interest rates. The quiz addresses several topics, including the formula to find real interest rates and the characteristics of real interest rates.

Quiz & Worksheet Goals

Use this printable worksheet and quiz to review:

  • Real interest rate formula
  • Characteristics of real interest rates
  • Finding the real interest rate
  • Finding the nominal interest rate

Skills Practiced

  • Interpreting information - verify you can read information regarding the characteristics of real interest rates and interpret it correctly
  • Distinguishing differences - compare and contrast topics from the lesson, such as nominal and real interest rates
  • Problem solving - use acquired knowledge to solve real rate of interest problems

Additional Learning

To find out more, review the corresponding lesson titled Real vs. Nominal Interest Rates and Changes in Prices. This lesson will help you:

  • Understand how to evaluate interest rates
  • Explain what a nominal interest rate involves
  • Identify the difference between a real and nominal interest rate
  • Describe the role of the Fisher Equation
  • Appreciate how to find the real interest rate of an account or loan