The equilibrium relationship that predicts that the real interest rate will be the same in every country is:

Question

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The Fisher Effect describes how nominal interest rates move according to the expected rate of inflation, implying that real interest rates (interest rates adjusted for inflation) should equalize across countries if capital is mobile and arbitrage is possible. Real Interest Rate Parity, a concept closely related, suggests that the real interest rates across countries will equalize in the presence of free capital flows and no capital controls, as investors seek the highest real returns. Both concepts together support the idea that real interest rates will be the same in every country, adjusting for factors like inflation and currency risk.

The Equilibrium Relationship That Predicts That the Real Interest Rate