To keep the real interest rate from changing by a large amount as inflation rises, the nominal interest rate has to increase with inflation.

Name: To keep the real interest rate from changing by a large amount as inflation rises, the nominal interest rate has to increase with inflation.
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Quizplus · Accepted Answer

This is known as the Fisher effect, where the nominal interest rate adjusts to changes in inflation to maintain a stable real interest rate.

To Keep the Real Interest Rate from Changing by a Large