If the inflation rate is 2 percent and the real interest rate is 3 percent, then the nominal interest rate is
A)5 percent.
B)1 percent.
C)1.5 percent
D)0.67 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is the sum of the real interest rate and the inflation rate. Therefore, nominal interest rate = real interest rate + inflation rate.
Nominal interest rate = 3% + 2% = 5%.

If the Inflation Rate Is 2 Percent and the Real