The Fisher effect says that

Question

Quizplus · Accepted Answer

The Fisher effect states that the nominal interest rate adjusts one for one with the inflation rate, meaning that an increase in the expected inflation rate will lead to an equal increase in the nominal interest rate. This relationship between nominal interest rates and inflation rates is central to many macroeconomic models and has important implications for monetary policy. Choices B and C are not accurate descriptions of the Fisher effect.

The Fisher Effect Says That