If the real rate of return is 2 percent, and the inflation rate is 0 percent, then the nominal interest rate must be:
A) 2 percent.
B) 0 percent.
C) 4 percent.
D) −2 percent.

Question

Quizplus · Accepted Answer

The nominal interest rate is equal to the real rate of return plus the inflation rate. Since the inflation rate is zero in this scenario, the nominal interest rate is equal to the real rate of return, which is 2 percent.

If the Real Rate of Return Is 2 Percent, and the Inflation