According to the Fisher effect, if the real rate of interest in a country is 5 percent and the annual inflation is expected to be 10 percent, the nominal interest rate will be

Question

Quizplus · Accepted Answer

The Fisher effect states that the nominal interest rate is equal to the real interest rate plus the expected rate of inflation. In this case, the real rate of interest is 5 percent and the expected rate of inflation is 10 percent, so the nominal interest rate would be 5 percent + 10 percent = 15 percent. Thus, the correct answer is option D, which is 15 percent.

According to the Fisher Effect, If the Real Rate of Interest