If the expected real interest rate in an economy is 6 percent and the expected inflation rate is 4 percent,then the nominal interest rate in the economy is ________.
A) 4 percent
B) 6 percent
C) 10 percent
D) 14 percent

Question

Quizplus · Accepted Answer

The nominal interest rate is the sum of the real interest rate and the inflation rate. Therefore, nominal interest rate = real interest rate + inflation rate = 6% + 4% = 10%.

If the Expected Real Interest Rate in an Economy Is