Which of the following statements is correct?
A) Nominal interest rate = Real interest rate - Inflation rate
B) Nominal interest rate = Real interest rate + Inflation rate
C) Nominal interest rate = Inflation rate - Real interest rate
D) Nominal interest rate = Inflation rate + Price index
E) Nominal interest rate = Inflation rate ÷ Real interest rate

Question

Quizplus · Accepted Answer

The correct formula for calculating the nominal interest rate is to add the real interest rate and inflation rate. This is because the nominal interest rate includes both the real interest rate (the rate of return adjusted for inflation) and the expected inflation rate. Therefore, option B is the correct statement.

Which of the Following Statements Is Correct