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According to the text, the real interest rate can be calculated by subtracting the inflation rate from the nominal interest rate. This can be represented mathematically as real interest rate = nominal interest rate - inflation rate. The higher the inflation rate, the lower the real interest rate will be. The real interest rate calculator uses the Fisher equation to determine the real interest rate.
The real interest rate (r) can be calculated by subtracting the inflation rate from the nominal interest rate. This can be represented mathematically as:
[ r = i - \pi ]
Where:
- ( r ) = real interest rate
- ( i ) = nominal interest rate
- ( \pi ) = inflation rate
Once the real interest rate is calculated, it can be utilized to determine the value of the price level (P).
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