Which of the following statements accurately describes the relationship between nominal interest rate, real interest rate, and inflation?

Show Answers

None of the provided statements are trueNominal interest rate equals inflation rate minus real interest rateReal interest rate equals nominal interest rate minus inflation rateNominal interest rate equals real interest rate minus inflation rate

Explanation

The correct relationship is that the real interest rate is calculated by subtracting the inflation rate from the nominal interest rate. This reflects the true cost of borrowing after adjusting for inflation.