Nominal Interest Rate = _____
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Real Interest Rate + Inflation rate
Nominal interest rate refers to the interest rate before taking inflation into account. The Nominal Interest Rate is composed of two elements: the Real Interest Rate and the Inflation Rate.
Nominal Interest Rate = Real Interest Rate + Inflation Rate
Note: The above formula is from the Fisher Equation which is not mentioned in NCERT. So this question is out of NCERT.