According to Fisher's Law, the nominal gross rate is equal to:
A) The product of the gross real rate and one plus the inflation rate.
B) The sum of the gross real rate and the inflation rate.
C) The difference between the real gross rate and the inflation rate.
D) a and b only.
E) None of the above.

Question

Quizplus · Accepted Answer

Fisher's Law states that the nominal interest rate is approximately equal to the real interest rate plus the inflation rate, but it also implies that the nominal rate is approximately the product of one plus the real rate and one plus the inflation rate for small rates. Therefore, both A and B are correct interpretations of Fisher's equation in different contexts.

According to Fisher's Law, the Nominal Gross Rate Is Equal