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20 November, 02:55

According to the Fisher effect, if the "real" rate of interest in a country is 3 percent and the expected annual inflation is 8 percent, what would the "nominal" interest rate be

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  1. 20 November, 03:07
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    11.24%

    Explanation:

    Fisher equation:

    (1 + nominal interest rate) = (1 + real interest rate) x (1 + expected annual inflation)

    1 + nominal interest rate = 1.03 x 1.08

    --> Nominal interest rate = 11.24%
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