In the United States during the late 1970s,the nominal interest rates were quite high,but the real interest rates were negative. From the Fisher equation,we can conclude that expected inflation in the United States during this period was
A)irrelevant.
B)low.
C)negative.
D)high.

Question

Quizplus · Accepted Answer

The Fisher equation states that nominal interest rate = real interest rate + expected inflation. If the nominal interest rate is high and the real interest rate is negative, then the expected inflation must be high in order to produce such a result. Therefore, the correct answer is D) high.

In the United States During the Late 1970s,the Nominal Interest