Nominal v. Real Interest Rates- Macro Topic 4.2

Mr. Clifford from ACDC Econ discusses interest rates, explaining their impact on borrowing and lending. He highlights the role of inflation in determining real interest rates and why banks must consider expected inflation. The video includes exercises to calculate nominal, real, and inflation rates, emphasizing the importance of understanding these concepts in financial contexts.

Explain the concept of unanticipated inflation and its potential impact on borrowers and banks.

If you charge an 8% interest rate and inflation rises to 10%, what is the real interest rate you are effectively receiving?