Assume a nominal interest rate on one-year U.S. Treasury Bills of 3.10% and a real rate of interest of 1.00%. Using the Fisher Effect Equation, what is the approximate expected rate of inflation in the U.S. over the next year?

Question

Quizplus · Accepted Answer

The Fisher Effect Equation states that the nominal interest rate is approximately the sum of the real interest rate and the expected inflation rate. Therefore, the expected inflation rate is approximately 3.10% - 1.00% = 2.10%.

Assume a Nominal Interest Rate on One-Year U