If the expected inflation rate was 2.5%,the expected real interest rate was 4.0%,and the real interest rate turned out to be 5.1%,then the actual inflation rate equals
A)1)4%.
B)1)5%.
C)2)6%.
D)6)5%.

Question

Quizplus · Accepted Answer

The actual inflation rate is equal to the real interest rate plus the expected inflation rate. In this case, the real interest rate is 5.1% and the expected inflation rate is 2.5%, so the actual inflation rate is 5.1% + 2.5% = 7.6%.

If the Expected Inflation Rate Was 2