The Fisher effect is the idea that a change in:
A) the real interest rate leads to an equal size change in the inflation rate.
B) the nominal interest rate leads to an equal size change in the real interest rate.
C) expected inflation leads to an equal size change in nominal interest rates.
D) expected inflation leads to an equal size change in the real GDP growth rate.

Question

Quizplus · Accepted Answer

The Fisher effect posits that a change in expected inflation leads to an equal size change in nominal interest rates, as lenders need to adjust the nominal rate to maintain their expected real return.

The Fisher Effect Is the Idea That a Change In