Evidence from the past 40 years in the United States supports the Fisher effect and shows that when the inflation rate is high, the ______ interest rate tends to be ______.

Question

Quizplus · Accepted Answer

The Fisher effect posits that the nominal interest rate adjusts to the expected inflation rate, meaning when inflation is high, nominal interest rates tend to be high to compensate for the loss of purchasing power.

Evidence from the Past 40 Years in the United States