If the nominal interest rate is 7% and the real interest rate is 3%, then the expected rate of inflation must be

Name: If the nominal interest rate is 7% and the real interest rate is 3%, then the expected rate of inflation must be
Brand: Quizplus
Rating: 4.8 (50 reviews)

Question

Quizplus · Accepted Answer

The expected rate of inflation can be found using the Fisher equation, which is: nominal interest rate = real interest rate + inflation rate. Plugging in the given values, 7% = 3% + inflation rate, we find that the inflation rate must be 4%.

If the Nominal Interest Rate Is 7% and the Real