Which one of the following best fits the Fisher hypothesis?
A)Long-term interest rates are based on current inflation rates.
B)Nominal interest rates are inversely related to real rates.
C)Interest rates tend to be higher than inflation rates.
D)Nominal interest rates tend to be relatively constant over time.
E)Future interest rates must be higher than current interest rates.

Question

Quizplus · Accepted Answer

The Fisher hypothesis suggests that nominal interest rates are composed of the real interest rate plus expected inflation, implying that nominal rates tend to be higher than inflation rates.

Which One of the Following Best Fits the Fisher Hypothesis