The relationship between nominal interest rates, real interest rates, and the inflation rate can be expressed by the Fisher equation:
\[ 1 + i = (1 + r)(1 + \pi) \]
Where:
- \( i \) is the nominal interest rate
- \( r \) is the real interest rate
- \( \pi \) is the inflation rate
In this case:
- \( i = 6% \) or 0.06
- \( r = 4% \) or 0.04
Using a simpler approximation for small rates, we can use:
\[ \pi \approx i - r \]
So:
\[ \pi \approx 0.06 - 0.04 = 0.02 \text{ or } 2% \]
This indicates that there is inflation of 2 percent.
Thus, the correct answer is: c. inflation; 2 percent.