The real rate is 2.50% and inflation is 3.25%. What is the approximate nominal rate?
A) 5.75%
B) 5.25%
C) 3.25%
D) 1.25%
Answer: A
Explanation: A) Roughly speaking, the nominal rate is the real rate plus inflation. Thus, the nominal rate is 2.50% plus 3.25% equals 5.75%.
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