Initially, the Nominal Rate of Interest Is 8 Percent and Inflation

Multiple Choice

Initially, the nominal rate of interest is 8 percent and inflation is 4 percent. The nominal interest rate then rises to 12 percent and the inflation rate to 8 percent. It follows that the real rate of interest has

A) fallen.
B) remained the same.
C) risen to 8 percent.
D) risen to 10 percent.