The adjustment of the nominal interest rate to the inflation rate is called the Fisher effect, after economist Irving Fisher, who first studied it.

Question

Quizplus · Accepted Answer

The statement is true. The Fisher effect is named after economist Irving Fisher, who observed the relationship between the nominal interest rate, inflation rate, and real interest rate. According to the Fisher effect, when the inflation rate increases, the nominal interest rate should increase by the same amount to maintain the real interest rate.

The Adjustment of the Nominal Interest Rate to the Inflation