A) 5%, 6% B) 6%, 7% C) 6%, 8.33%

The nominal rate of interest is 3% and the expected rate of inflation is 1%. If the expected rate of inflation increases by 3 percentage points to a new level of 4%, what will be the new nominal rate of interest according to the Fisher effect? According to the Darby/Feldstein effect (assume a 25% marginal tax rate)