Question

what is inflation and real interest rates

Answer 1

Inflation is the rate in which the price of the commodity or products is rising and the purchasing power is decreasing , Inflation can be measured by

Change in inflation = (final cost price index value/ initial cost price index value), a average level of inflation is needed in the market because to reduce oversaving among the people and to flow money in the market for a good economy

Real interest rate

This interest rate adjust with inflation , to be specific

Real interest rate = nominal interest rate - inflation (it can be actual or expected), this rate will reflect the borrower and lender in the market, since inflation is not fixed the real interest rates is made on future inflation , the real interest rate will provide how much return the lender will get.