The Fisher Effect decomposes nominal interest rates into the ________ and the expected rate of inflation.

Question

Quizplus · Accepted Answer

The Fisher Effect states that nominal interest rates can be decomposed into the expected real interest rate and the expected rate of inflation. This means that the nominal interest rate will be equal to the sum of the expected real interest rate and expected inflation. Therefore, the best choice is B, the expected real interest rate. A, C, and D are not relevant to the Fisher Effect.

The Fisher Effect Decomposes Nominal Interest Rates into the ________