The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the
A)Friedman Effect.
B)Hume Effect.
C)Fisher Effect.
D)the inflation tax.

Question

Quizplus · Accepted Answer

The claim that increases in the growth rate of the money supply increase nominal interest rates but not real interest rates is known as the Fisher Effect, named after economist Irving Fisher. This effect suggests that while increasing the money supply may lead to higher nominal interest rates, it would not affect the real interest rate as that depends on factors such as productivity, demand, and supply of credit.

The Claim That Increases in the Growth Rate of the Money