What is the name of the one-for-one adjustment of the nominal interest rate to the inflation rate?
A)the Friedman Effect
B)the Hume Effect
C)the Fisher Effect
D)the Ricardian equivalence effect

Question

Quizplus · Accepted Answer

The one-for-one adjustment of the nominal interest rate to the inflation rate is known as the Fisher Effect. The Fisher Effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate. If inflation is expected to increase, lenders will demand a higher nominal interest rate to offset the decrease in the real value of the loan. Therefore, the one-for-one adjustment of nominal interest rates to inflation rates is a result of the Fisher Effect.

What Is the Name of the One-For-One Adjustment of the Nominal