what real and nominal interest ratesSolutionFirst let me exp

what real and nominal interest rates

Solution

First let me explain what nominal interest rate is:

Nominal interest rate is the rate at which banks lend to the customers, This rate usually do not take inflation into consideration,

Real interest rate: This is the nothing but the Nominal Interest rate - Inflation

It gives inflation adjusted values which shows the real value of money, In US real interest rates were negative for many years.