If the annual real rate of interest is 3.0%, and the expected inflation rate is 4.0%, the nominal rate of interest would be approximately
A) 3.7%.
B) 7.0%.
C) 2.5%.
D) −1.2%.

Name: If the annual real rate of interest is 3.0%, and the expected inflation rate is 4.0%, the nominal rate of interest would be approximately A) 3.7%. B) 7.0%. C) 2.5%. D) −1.2%.
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Question

Quizplus · Accepted Answer

The nominal interest rate can be approximated by adding the real interest rate and the expected inflation rate: 3.0% + 4.0% = 7.0%.

If the Annual Real Rate of Interest Is 3