Which of the following combinations of nominal interest rates and inflation implies a real interest rate of 7 percent?

a. a nominal interest rate of 5 percent and an inflation rate of 4 percent.
b. a nominal interest rate of 4 percent and an inflation rate of 3 percent.
c. a nominal interest rate of 14 percent and an inflation rate of 2 percent.
d.  a nominal interest rate of 8 percent and an inflation rate of 1 percent.

FOORQUIZ ANSWER:

d.  a nominal interest rate of 8 percent and an inflation rate of 1 percent.