The Fisher relation is
A)the negative relationship between unemployment and vacancies.
B)trend growth in real GDP.
C)the Phillips curve.
D)of no interest to economists.
E)a positive relationship between the nominal interest rate and inflation.

Question

Quizplus · Accepted Answer

The Fisher relation refers to the positive relationship between the nominal interest rate and inflation. It is named after the economist Irving Fisher. The idea behind this relationship is that lenders require compensation in the form of interest for the expected erosion of the value of money due to inflation, and borrowers are willing to pay higher interest rates in order to finance their expenditures.

The Fisher Relation Is