In 1981, many nominal interest rates in the United States were 15%, but the inflation rate was 10%. In 2015, many interest rates were 1%, and the inflation rate was 2%.

Part 1

In 1981, the real interest rate was _____%, and in 2015, the real interest rate was _____%.

Part 2

All else equal, the drop in interest rates between 1981 and 2015 would cause the quantity of loanable funds demanded to (increase/ decrease/ not change).

Part 3

Suppose in either 1981 or 2015 you saved $1,000. How much interest much would have earned in real terms?

1981: $_____

2015: $_____