If the nominal rate is 5.5%, and the real rate is 1.5%, determine the inflation rate.

Name: If the nominal rate is 5.5%, and the real rate is 1.5%, determine the inflation rate.
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Question

Quizplus · Accepted Answer

The inflation rate can be calculated using the Fisher equation, which is approximately given by the formula: inflation rate ≈ nominal rate - real rate. Therefore, the inflation rate ≈ 5.5% - 1.5% = 4%. The closest option to this calculation is 3.94%.

If the Nominal Rate Is 5