Which of the Following Combinations of Nominal Interest Rates and Inflation

question 220

Multiple Choice

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

• A)a nominal interest rate of 5 percent and an inflation rate of 4 percent.
• B)a nominal interest rate of 4 percent and an inflation rate of 3 percent.
• C)a nominal interest rate of 8 percent and an inflation rate of 1 percent.
• D)a nominal interest rate of 14 percent and an inflation rate of 2 percent.

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