If the real interest rate is 3 percent and the inflation rate is 2 percent, the nominal interest rate is approximately
A) 1.5 percent.
B) 5 percent.
C) 1 percent.
D) - 1 percent.

Question

Quizplus · Accepted Answer

The formula for nominal interest rate is:
Nominal Interest Rate = Real Interest Rate + Inflation Rate

Substituting the given values, we get:
Nominal Interest Rate = 3% + 2%
Nominal Interest Rate = 5%

Therefore, the nominal interest rate is approximately 5 percent.

If the Real Interest Rate Is 3 Percent and the Inflation