What is the name of the one-for-one adjustment of the nominal interest rate to the inflation rate?
A) the Keynes effect
B) the Hume effect
C) the Fisher effect
D) the Ricardian equivalence effect

Question

Quizplus · Accepted Answer

The one-for-one adjustment of the nominal interest rate to the inflation rate is known as the Fisher effect, named after the economist Irving Fisher. This effect is based on the idea that lenders need to be compensated for the loss of purchasing power due to inflation, so they will require a higher nominal interest rate to maintain the same real interest rate. The Fisher effect is an important concept in macroeconomics and monetary policy.

What Is the Name of the One-For-One Adjustment of the Nominal