Question

differentiate between interest rate and inflation with example​

Answer 1

Explanation:

Suppose a bank loans a person $200,000 to purchase a house at a rate of 3%—the nominal interest rate not factoring in inflation. Assume the inflation rate is 2%. The real interest rate the borrower is paying is 1%. ... That means the purchasing power of the bank only increases by 1%.

Answer 2

Answer:

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❥Inflation and interest rates are in close relation to each other, and frequently referenced together in economics. Inflation refers to the rate at which prices for goods and services rise. Interest rate means the amount of interest paid by a borrower to a lender, and is set by central banks.

❥Suppose a bank loans a person $200,000 to purchase a house at a rate of 3%—the nominal interest rate not factoring in inflation. Assume the inflation rate is 2%. The real interest rate the borrower is paying is 1%. ... That means the purchasing power of the bank only increases by 1%.

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