The final component of the equation for the Fisher Effect, (r)(?), where r = the real rate of return and ? = the expected rate of inflation, is often dropped from the equation because the number is simply too large for most Western economies.

Question

Quizplus · Accepted Answer

The final component of the equation for the Fisher Effect, (r)(?), is not dropped from the equation due to its large size. It is an essential component to calculate the nominal interest rate.

The Final Component of the Equation for the Fisher Effect