The nominal interest rate is 5 percent and the real interest rate is 3 percent. What is the inflation rate?
A)8 percent
B)2 percent
C)0.2 percent
D)-3 percent

Question

Quizplus · Accepted Answer

The inflation rate can be calculated using the Fisher equation, which is: nominal interest rate = real interest rate + inflation rate. Therefore, with a nominal rate of 5% and a real rate of 3%, the inflation rate is 2% (5% - 3% = 2%).

The Nominal Interest Rate Is 5 Percent and the Real