You deposit $2,000 in a savings account and a year later you have $2,100. meanwhile, the consumer price index rises from 200 to 204. in this case, the nominal interest rate is percent and the real interest rate is percent.

nominal interest rate = 5%

real interest rate = 3%

Explanation:

given data

deposit previous = $2,000

deposit present = $2,100

CPI consumer price index rises =  200 to 204

to find out

nominal interest rate and real interest rate

solution

we get here first nominal interest rate that is express as

nominal interest rate = ( deposit present - deposit previous ) ÷ deposit previous × 100    ..........................1

put here value we get

nominal interest rate =  × 100

nominal interest rate = 5%

and

now we get here inflation rate that is

inflation rate = ( CPI present - CPI previous ) ÷ CPI previous  × 100    .............2

inflation rate =  × 100

inflation rate = 2%

and

real interest rate will be as

real interest rate = nominal interest rate - inflation rate    .................3

real interest rate = 5% - 2%

real interest rate = 3%

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