Which of the Following Combinations of Real Interest Rates and Inflation

question 52

Multiple Choice

Which of the following combinations of real interest rates and inflation implies a nominal interest rate of 7 percent?

• A)a real interest rate of 2.5 percent and an inflation rate of 2 percent
• B)a real interest rate of 4 percent and an inflation rate of 11 percent
• C)a real interest rate of 6 percent and an inflation rate of 1 percent
• D)a real interest rate of 5.5 percent and an inflation rate of 3 percent

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Definitions:

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