Answer to Question #87573 in Macroeconomics for nhlanhla Faith Nkomo

Question

If real interest rate is 4 per cent, and inflation is 7 per cent, what is the value of nominal interest rate?

Answer 1

Nominal interest rate = Real interest rate + rate of inflation.

         Given,

     Real interest rate = 4 percent

                            Inflation rate = 7 percent

         Therefore,

                            Nominal interest rate = 4 percent + 7 percent

                                                                     = 11%