If the annual real rate of interest is 4%, and the expected inflation rate is 2%, the nominal rate of interest would be approximately
A) 6%.
B) 3%.
C) 1%.
D) 5%.
E) None of the options are correct.

Question

Quizplus · Accepted Answer

The nominal interest rate can be approximated by adding the real interest rate to the expected inflation rate, which in this case is 4% + 2% = 6%.

If the Annual Real Rate of Interest Is 4%, and the Expected