According to the Fisher effect, expectations of higher inflation cause savers to require a ____ on savings.
A)higher nominal interest rate
B)higher real interest rate
C)lower nominal interest rate
D)lower real interest rate

Question

According to the Fisher effect, expectations of higher inflation cause savers to require a ____ on savings. ​
A)higher nominal interest rate
B)higher real interest rate
C)lower nominal interest rate
D)lower real interest rate

Quizplus · Accepted Answer

The Fisher effect posits that expected inflation leads savers to demand higher nominal interest rates to compensate for the loss in purchasing power, keeping the real interest rate relatively stable.

According to the Fisher Effect, Expectations of Higher Inflation Cause