However, they will find that the nominal interest rates that they receive will be low, as compared to the interest rates that they enjoyed during the high inflation period. After all, the simple formula for determining interest rate is: Nominal Interest rate = Real Interest rate + Rate of Inflation. 34.
As the real interest rate in any economy will be more or less constant, the nominal interest rate is directly proportional to rate of inflation. Thus it will rise when rate of inflation increases and fall when the rate of inflation falls. 35.