Which of the following represents the Fisher effect?
A) Cross Rate = Real Interest Rate + Nominal Interest Rate
B) Real Interest Rate = Nominal Interest Rate + Spot Rate
C) Nominal Interest Rate = Real Interest Rate + Inflation Rate
D) Real Interest Rate = Nominal Interest Rate + Unemployment Rate

Question

Quizplus · Accepted Answer

The Fisher effect states that the nominal interest rate equals the real interest rate plus the expected inflation rate. Therefore, option C represents the Fisher effect, as it shows that the nominal interest rate is equal to the sum of the real interest rate and the inflation rate.

Which of the Following Represents the Fisher Effect