If the real rate of return is 3 percent, and the inflation rate is 4 percent, then the nominal interest rate must be:
A) −1 percent.
B) 1 percent.
C) 7 percent.
D) −7 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the sum of the real rate of return and the inflation rate, so in this case the nominal interest rate would be 7 percent (3 percent + 4 percent).

If the Real Rate of Return Is 3 Percent, and the Inflation