According to the textbook, studies looking for evidence of the Fisher effect across countries find that nations with faster rates of price inflation generally experience:
A) Higher interest rates
B) Lower interest rates
C) More volatile interest rates
D) Less volatile interest rates
E) None of the above

Question

Quizplus · Accepted Answer

The Fisher effect posits that real interest rates are stable over time, and that nominal interest rates adjust to compensate for inflation. Therefore, countries with higher inflation rates tend to have higher nominal interest rates to maintain a stable real interest rate.

According to the Textbook, Studies Looking for Evidence of the Fisher