According to the Fisher equation,the nominal interest rate is equal to:
A)the rate of inflation.
B)the real interest rate minus the rate of inflation.
C)the real interest rate plus the rate of inflation.
D)the rate of unemployment.
E)the real interest rate plus short-run economic fluctuations.

Question

Quizplus · Accepted Answer

The Fisher equation states that the nominal interest rate equals the sum of the real interest rate and the rate of inflation. Mathematically, it can be expressed as follows: Nominal Interest Rate = Real Interest Rate + Inflation Rate. Therefore, option (C) is the correct choice. Option (A) is incorrect since the nominal interest rate is not equal to the rate of inflation alone; it includes both the real interest rate and inflation. Option (B) is incorrect as it subtracts the rate of inflation from the real interest rate, whereas the Fisher equation adds it. Options (D) and (E) are unrelated to the Fisher equation and are, therefore, incorrect.

According to the Fisher Equation,the Nominal Interest Rate Is Equal