Interest Rates (percent per year) 15% CASE STUDY 10 0-Nominal interest rate Real interest rate -5 1965 1970 1975 1980 1985 1990 1995 CHAPTER 24 M 2000 2005 2010 MEASURING THE COST OF LIVING 525 Interest Rates in the U.S. Economy Figure 3 shows real and nominal interest rates the U.S. economy since 1965. The nominal interest rate in this figure is the rate on 3-month Treasury bills (although data on other interest rates would be similar). The real interest rate is computed by subtracting the rate of inflation from this nominal interest rate. Here the infla- tion rate is measured as the percentage change in the consumer price index. One feature of this figure is that the nominal interest rate almost always exceeds the real interest rate. This reflects the fact that the U.S. economy has experienced rising consumer prices in almost every year during this period. By contrast, if you look at data for the U.S. economy during the late 19th century or for the Japanese economy in some recent ye