If the nominal interest rate is 4 percent and the real interest rate is -2.5 percent,then the inflation rate is
A)-6.5 percent.
B)-1.5 percent.
C)1.5 percent.
D)6.5 percent.

Question

Quizplus · Accepted Answer

The formula for calculating the real interest rate is:
Real interest rate = Nominal interest rate - Inflation rate
Given the nominal interest rate as 4% and the real interest rate as -2.5%, the inflation rate can be calculated as:
-2.5% = 4% - Inflation rate
Inflation rate = 4% + 2.5%
Inflation rate = 6.5%
Therefore, the correct answer is D, which is 6.5%.

If the Nominal Interest Rate Is 4 Percent and the Real