answers: real interest rate
context: a loan because each unit of currency would get devaluated due to inflation by the same factor as the nominal amount gets increased. The relationship between the real interest value formula_1, the nominal interest rate value formula_2, and the inflation rate value formula_3 is given by In this analysis, the nominal rate is the stated rate, and the real interest rate is the interest after the expected losses due to inflation. Since the future inflation rate can only be estimated, the "ex ante" and "ex post" (before and after the fact) real interest rates may be different; the premium paid </s> on long-run determinants of the RER, rather than on short-term cyclical and speculative forces. It represents a RER consistent with macroeconomic balance, characterized by the achievement of internal and external balances at the same time. Internal balance is reached when the level of output is in line with both full employment of all available factors of production, and a low and stable rate of inflation. On the other hand, external balance holds when actual and future CA balances are compatible with long-term sustainable net capital flows. Nevertheless, the FEER is viewed as a normative measure of the RER since it </s> significantly while disposable incomes stagnate and employees work longer years before retiring. Because interest and inflation are generally given as percentage increases, the formulae above are (linear) approximations. For instance, is only approximate. In reality, the relationship is so The two approximations, eliminating higher order terms, are: The formulae in this article are exact if logarithmic units are used for relative changes, or equivalently if logarithms of indices are used in place of rates, and hold even for large relative changes. Most elegantly, if the natural logarithm is used, yielding the neper as logarithmic units, scaling by 100 to obtain
question: nominal interest rate minus the rate of inflation equals