Principles of Macroeconomics / Unit 6 MAC 0514 short lesson, about 20 seconds
The Real Interest Rate
Captions available
The idea
The real interest rate is the nominal rate minus the inflation rate. It is what a lender actually earns in purchasing power.
In practice
Four percent interest with five percent inflation is a real return of minus one percent.
Where people slip
Tax is charged on the nominal gain, so a saver can owe tax on a return that lost purchasing power.
Your place on the trail
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Builds on
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