What is the basis of the relationship between the Fisher effect and the loanable funds theory?
A) the saver's desire to maintain the existing real rate of interest
B) the borrower's desire to achieve a positive real rate of interest
C) the saver's desire to achieve a negative real rate of interest
D) B and C

Question

Quizplus · Accepted Answer

The Fisher effect suggests that nominal interest rates adjust to expected inflation to maintain the real rate of interest. This aligns with the loanable funds theory, where savers aim to preserve their real returns, thus supporting option A.

What Is the Basis of the Relationship Between the Fisher