Let R denote the real interest rate, i denote the nominal interest rate, and $\pi$ denote the rate of inflation. The equation i = R + $\pi$ is called:
A) the money supply.
B) the quantity equation.
C) the Fisher equation.
D) the quantity theory of money.
E) money neutrality.

Question

Let R denote the real interest rate, i denote the nominal interest rate, and  $\pi$ denote the rate of inflation. The equation i = R +  $\pi$ is called:
A) the money supply.
B) the quantity equation.
C) the Fisher equation.
D) the quantity theory of money.
E) money neutrality.

Quizplus · Accepted Answer

The equation i = R + π is known as the Fisher equation, named after economist Irving Fisher. It relates the nominal interest rate (i) to the real interest rate (R) and the rate of inflation (π). This equation helps to understand the relationships between inflation, interest rates, and the purchasing power of money.

Let R Denote the Real Interest Rate, I Denote the Nominal