According to the international Fisher effect,the differences in nominal interest rates across countries reflect the differences in their expected rates of inflation.

Question

Quizplus · Accepted Answer

The international Fisher effect states that the differences in nominal interest rates between two countries are equal to the expected difference in their inflation rates. This means that countries with higher expected inflation rates would have higher nominal interest rates to compensate for the eroding purchasing power of their currency. Therefore, the answer is true.

According to the International Fisher Effect,the Differences in Nominal Interest