The tendency for nominal interest rates to be high when inflation is high and to be low when inflation is low is known as

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The tendency for nominal interest rates to be high when inflation is high and to be low when inflation is low is known as the Fisher effect, named after economist Irving Fisher. The effect states that real interest rates (adjusted for inflation) are constant over time, and nominal interest rates move in tandem with expected inflation. Therefore, when inflation is high, nominal interest rates will be adjusted upwards to compensate for the expected loss of purchasing power, and vice versa when inflation is low.

The Tendency for Nominal Interest Rates to Be High When