What is the basis of the relationship between the Fisher effect and the loanable funds theory?
A)savers' desire to maintain the existing real rate of interest
B)borrowers' desire to achieve a positive real rate of interest
C)savers' desire to achieve a negative real rate of interest
D)borrowers' desire to achieve a positive real rate of interest AND savers' desire to achieve a negative real rate of interest

Question

Quizplus · Accepted Answer

The Fisher effect posits that the real interest rate is stable over time, and changes in the expected inflation rate will be fully reflected in the nominal interest rate. The loanable funds theory, which deals with the market where savers supply funds for loans to borrowers, is connected to the Fisher effect through savers' desire to maintain a real rate of interest that compensates for inflation, ensuring their savings do not lose value over time.

What Is the Basis of the Relationship Between the Fisher