The Fisher effect is used to demonstrate a strong correlation between inflation rates and
A) interest rates.
B) competition.
C) entrepreneurial activity.
D) spot exchange rates.
E) forward rates.

Question

Quizplus · Accepted Answer

The Fisher effect describes the relationship between nominal interest rates, real interest rates, and expected inflation, indicating that nominal interest rates adjust to reflect changes in expected inflation.

The Fisher Effect Is Used to Demonstrate a Strong Correlation