Question

If the real interest rate is 4%, and the inflation rate is 1%,

then the nominal interest rate is ____%.
a- 5
b- 4
c- 3
d- 1

Answer 1

The nominal interest rate is calculated as the sum of the real interest rate and the inflation rate. Given a real interest rate of 4% and an inflation rate of 1%, the nominal interest rate would be 5%.

Step-by-step explanation:

If the real interest rate is 4%, and the inflation rate is 1%, then the nominal interest rate can be calculated using the formula:

Nominal Interest Rate = Real Interest Rate + Inflation Rate

Substituting the given values:

Nominal Interest Rate = 4% (Real Interest Rate) + 1% (Inflation Rate) = 5%

Therefore, the nominal interest rate is 5%.

The nominal interest rate is calculated as the sum of the real interest rate and the inflation rate. Given a real interest rate of 4% and an inflation rate of 1%, the nominal interest rate would be 5%.