If the annual real rate of interest is 6%, and the expected inflation rate is 2%, the nominal rate of interest would be approximately
A) 1%.
B) 8%.
C) 20%.
D) 15%.

Name: If the annual real rate of interest is 6%, and the expected inflation rate is 2%, the nominal rate of interest would be approximately A) 1%. B) 8%. C) 20%. D) 15%.
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Question

Quizplus · Accepted Answer

The nominal interest rate can be approximated using the Fisher equation: nominal rate ≈ real rate + inflation rate. Therefore, 6% (real rate) + 2% (inflation rate) = 8%.

If the Annual Real Rate of Interest Is 6%, and the Expected