The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the
A)Friedman Effect.
B)Hume Effect.
C)Fisher Effect.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the Fisher Effect, named after economist Irving Fisher. The Friedman Effect refers to the idea that inflation is always and everywhere a monetary phenomenon. The Hume Effect is a term used to describe the concept that a trade deficit will eventually lead to an outflow of gold, which in turn will decrease the money supply and cause inflation to decrease.

The Claim That Increases in the Growth Rate of the Money