If the nominal rate of interest is 8 percent and the real rate of interest is 3 percent, the inflation rate must be 11 percent.

Question

Quizplus · Accepted Answer

The Fisher equation states that the nominal interest rate is approximately equal to the sum of the real interest rate and the inflation rate. Therefore, if the nominal rate is 8% and the real rate is 3%, the inflation rate would be approximately 5%, not 11%.

If the Nominal Rate of Interest Is 8 Percent and the Real