If the rate of inflation is 6 percent and the real interest rate is 2 percent, the nominal interest rate should be
A) 2 percent.
B) 4 percent.
C) 8 percent.
D) -2 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the sum of the real interest rate and the rate of inflation. In this case, the nominal interest rate would be:

Nominal interest rate = Real interest rate + Inflation rate
Nominal interest rate = 2% + 6%
Nominal interest rate = 8%

Therefore, the correct answer is C. The nominal interest rate should be 8 percent.

If the Rate of Inflation Is 6 Percent and the Real