You observe that the current interest rate on short-term U.S. Treasury bills is

Question

You observe that the current interest rate on short-term U.S. Treasury bills is 4.51 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, currently implies that inflation is 1.4 percent. What is the approximate real rate of interest on short-term Treasury bills? (Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

You observe that the current interest rate on short-term U.S. Treasury bills is 4.51 percent. You also read in the newspaper that the GDP deflator, which is a common macroeconomic indicator used by market analysts to gauge the inflation rate, currently implies that inflation is 1.4 percent. What is the approximate real rate of interest on short-term Treasury bills? (Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

Real rate of interest is Nominal interest rate- Inflation rate

So Real rate of interest =4.51-1.40=3.11

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