If a Country Had Deflation of 3 Percent While the Nominal

Multiple Choice

If a country had deflation of 3 percent while the nominal interest rate increased by 1 percentage point, how would the real interest rate change?

A) The real interest rate would decrease by 2 percentage point.
B) The real interest rate would increase by 2 percentage point.
C) The real interest rate would decrease by 4 percentage points.
D) The real interest rate would increase by 4 percentage points.