If the expected real interest rate 5% and expected inflation 3%,the nominal interest rate in year t is approximately
A)2%.
B)3%.
C)5%.
D)8%.
E) 11%.

Name: If the expected real interest rate 5% and expected inflation 3%,the nominal interest rate in year t is approximately A)2%. B)3%. C)5%. D)8%. E) 11%.
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Question

Quizplus · Accepted Answer

The nominal interest rate can be approximated by adding the expected real interest rate to the expected inflation rate, which gives 5% + 3% = 8%.

If the Expected Real Interest Rate 5% and Expected Inflation