If the inflation rate is 5 percent and the real rate of interest is 3 percent, the nominal interest rate is
A) 8 percent.
B) 5 percent.
C) 3 percent.
D) 2 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the sum of the real interest rate and the inflation rate. Therefore, the nominal interest rate is 5 percent (inflation rate) + 3 percent (real rate of interest) = 8 percent.

If the Inflation Rate Is 5 Percent and the Real