Question
You lent $370 to a friend for one year at a nominal rate of interest of 3 percent. Inflation during that year was 2 percent.
You lent $370 to a friend for one year at a nominal rate of interest of 3 percent. Inflation during that year was 2 percent. Did you experience an increase or decrease in the purchasing power of your money? How much did it increase or decrease? (Round answer to 2 decimal places, e.g. 52.75%.)
The purchasing power ______(increasing or decreasing) by ____%.
If the nominal rate of interest is 4.19 percent and the expected rate of inflation is 1.76 percent, what is the real rate of interest? (Round percentage answer to 3 decimal places, e.g. 52.754%.)
real rate of interest ___%
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