Under the Fisher effect
A) Lower inflation is associated with lower nominal interest rates
B) Lower inflation is associated with higher nominal interest rates
C) Higher inflation is associated with longer duration
D) All of the above

Question

Quizplus · Accepted Answer

The Fisher effect posits that real interest rates are unaffected by inflation in the long run, meaning that higher inflation leads to higher nominal interest rates to maintain the real interest rate. Thus, lower inflation is associated with lower nominal interest rates.

Under the Fisher Effect