The nominal (money) rate of interest
A) is the real rate of interest plus the inflationary premium.
B) can be expected to decline as inflation accelerates.
C) fell to historic lows during the 1970s when the United States experienced double-digit rates of inflation.
D) can be expected to increase when the government is running a budget surplus.

Question

Quizplus · Accepted Answer

The nominal rate of interest is the sum of the real rate of interest and the inflationary premium, which compensates for expected inflation.

The Nominal (Money) Rate of Interest