the nominal interest rate a determines how high the actual i

the nominal interest rate

a) determines how high the actual inflation rate will be

b) determines the real return on an investment

c)equals the amount of expected inflation plus the real interest rate

d)is not observed in the real world

e)equals the inflation rate minus the real interest rate

Solution

c)equals the amount of expected inflation plus the real interest rate

Nominal Interest Rate = Real Interest Rate + Inflation (Expected or Actual)