If the real interest rate is 4 percent and the inflation rate is 3 percent, the nominal interest rate is approximately
A) 7 percent.
B) 12 percent.
C) 1.33 percent.
D) 1 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the sum of the real interest rate and the inflation rate. So, the nominal interest rate in this case is approximately 7 percent (4 percent real interest rate + 3 percent inflation rate).

If the Real Interest Rate Is 4 Percent and the Inflation