If inflation is 8 percent and the real interest rate is 3 percent, then the nominal interest rate must be ?
Correct answer: C. 11 percent
- A. 3/8 percent
- B. 5 percent
- C. 11 percent
- D. 24 percent
Explanation
Using the Fisher relationship, nominal interest is approximately the real interest rate plus expected inflation: 3% + 8% = 11%. The exact compound result is slightly higher, but 11% is the intended answer.
Report an error
The more specific you are, the faster it gets fixed. A source beats an opinion.
Prefer email? [email protected]
About Macroeconomics
The economy is studied as a whole through national income, gross domestic product, inflation, unemployment, economic growth and business cycles. Coverage includes aggregate demand and supply, consumption and investment, money and banking, fiscal and monetary policy, exchange rates and balance of payments, which distinguishes macroeconomics from the study of individual markets.
Practise Macroeconomics
1,499 free Macroeconomics MCQs from Economics, each with the correct answer and an explanation. Unlimited attempts, no account needed.
Discussion
Stuck on an option, or know a faster way to get there? Ask or explain it here.
No comments yet. Be the first to explain this one.
Exams that ask Economics questions like this
Economics is on 3 papers prepared for on TestUstad, and all of them draw the same bank, so this question is worth knowing for every one of them.
More Macroeconomics questions
Under Which of the following conditions would you prefer to be the borrower ?
If workers and firms agree on an increase in wages based on their expectations of inflation and inflation turns out to be more than they expected ?
An increase in aggregate demand is more likely to lead to demand pull inflation if ?
Suppose your income rises from Rs19,000 to Rs31,000 while the CPI rises from 122 to 169 Your standard of living has likely ?
If there is an increase in the price of apples which causes consumers to purchase fewer kilograms of apples and more kilograms of oranges, the CPI will suffer from ?
Which of the following would probably cause the CPI to rise more than the GDP deflator in the Pakistan ?