Real Interest Rates vs. Nominal Interest Rates
A look at real interest rates, what a real interest rate is, and how it differs from a nominal interest rate.
Can real interest rates go to zero? Could they even be negative? I've heard that this has happened before. What would cause something like that to happen and what impact would it have on the economy?
"Calculating and Understanding Real Interest Rates" explains what the real rate of interest is and how it can easily be calculated. We also show how it can be used to make investment decisions.
Generally a real variable, such as the real interest rate, is one where the effects of inflation have been factored in. A nominal variable is one where the effects of inflation have not been accounted for.