The decomposition of the nominal interest rate into the sum of the expected real interest rate and the expected rate of inflation is known as the

Question

Quizplus · Accepted Answer

The decomposition of nominal interest rate into expected real interest rate and expected rate of inflation is known as the Fisher Effect. The Fisher Effect indicates that the nominal interest rate comprises two components: the real interest rate and the expected inflation rate.

The Decomposition of the Nominal Interest Rate into the Sum