If the rate of inflation is 4 percent and the real interest rate is 3 percent, the nominal interest rate should be
A) 1 percent.
B) 4 percent.
C) 7 percent.
D) 11 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the sum of the real interest rate and the rate of inflation. 
Nominal interest rate = real interest rate + rate of inflation 
Nominal interest rate = 3% + 4% 
Nominal interest rate = 7%

If the Rate of Inflation Is 4 Percent and the Real