Answer:
Real interest rate was 3%
Explanation:
At the end of the year Kelly had 2 percent more dollars which mean that the nominal interest rate was 2 percent. However she could by 3 percent more things which means that her purchasing power increased by 3 percent therefore the real interest rate she earned was 3 percent as she can now purchase 3% more things. The reason for the 3 percent increase in interest rate is that the nominal interest rate as 2% and the prices fell 1%, therefore her real interest rate was 3%.
