The real rate of interest equals 3% and the expected rate of inflation equals 2%. The nominal rate of interest equals
A) 2%.
B) 3%.
C) -1%.
D) 5%.

Name: The real rate of interest equals 3% and the expected rate of inflation equals 2%. The nominal rate of interest equals A) 2%. B) 3%. C) -1%. D) 5%.
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Question

Quizplus · Accepted Answer

Nominal interest rate = Real interest rate + Expected inflation rate
Nominal interest rate = 3% + 2%
Nominal interest rate = 5%

The Real Rate of Interest Equals 3% and the Expected