Evidence from the past 40 years in Canada supports the Fisher effect and shows that when the inflation rate is high, the _____ interest rate tends to be _____.

Question

Quizplus · Accepted Answer

The Fisher effect suggests that the nominal interest rate adjusts to expected inflation, so when inflation is high, the nominal interest rate tends to be high to maintain the real interest rate.

Evidence from the Past 40 Years in Canada Supports the Fisher