The Fisher hypothesis states that
A) Nominal interest rates are relatively constant for all maturity periods.
B) Long-term interest rates are based on current inflation rates
C) Nominal interest rates are directly influenced by inflation rates
D) Nominal interest rates are inversely related to inflation rates
E) Interest rates are independent of inflation rates

Question

Quizplus · Accepted Answer

The Fisher hypothesis posits that nominal interest rates adjust in direct proportion to expected inflation rates, implying that real interest rates (adjusted for inflation) remain stable over time.

The Fisher Hypothesis States That