Neo-Fisherism says
A) the central bank should increase inflation by lowering nominal interest rates.
B) the central bank should increase inflation by lowering the money supply.
C) the central bank should increase inflation by raising the nominal interest rate.
D) the central bank should increase inflation by lowering the real interest rate.
E) that Fisherism is wrong.

Question

Quizplus · Accepted Answer

Neo-Fisherism proposes that the central bank can increase inflation by raising the nominal interest rate, which is the opposite of Fisherism's suggestion that lowering nominal interest rates can increase inflation. According to Neo-Fisherism, increasing nominal interest rates causes an increase in the expected inflation rate, which leads to inflation expectations becoming self-fulfilling and an increase in actual inflation. This view assumes that the central bank's actions on nominal interest rates can have long-lasting effects on inflation expectations, and it is still a subject of debate among economists.

Neo-Fisherism Says