Pursuant to the Fisher Effect, the nominal rate of interest is 5.00%, the inflation rate is 2.00% and the real rate of interest is

Question

Quizplus · Accepted Answer

The Fisher Effect states that the nominal interest rate is equal to the sum of the real interest rate and the expected inflation rate. Therefore, the real rate of interest can be calculated as follows: 5% = 2.94% + 2%, where 2.94% is the real rate of interest.

Pursuant to the Fisher Effect, the Nominal Rate of Interest