If the nominal interest rate is 4.00% and the rate of inflation is 2.25%, what is the real interest rate?

a. 1.75%
b. 4.50%
c. 6.25%
d. 9.00%

The correct answer is A.

To solve this question we need to apply the following formula:  

r= i – = 4 % - 2.25% = 1.75 %

where:

When inflation is zero note how both interest rates (nominal and real are equal).

уєѕ нє ℓσѕт ¢σитяσℓ σf нιѕ ρυριℓѕ

your answer is rising unemployment and inflation.