The Fisher effect can be written as follows: ________.

Question

Quizplus · Accepted Answer

The Fisher effect states that the nominal interest rate equals the real interest rate plus the expected inflation rate. Therefore, the correct formula is Nominal Interest Rate = Real Interest Rate + Inflation Rate. Option A is incorrect as there is no mention of an inflation rate, whereas option B is incorrect as it states that the real interest rate is equal to the nominal interest rate plus the inflation rate, when it is actually the other way around. Option D mentions the unemployment rate, which is not related to the Fisher effect.

The Fisher Effect Can Be Written as Follows: ________