What does the Fisher effect imply?
A) The nominal interest rate adjusts one for one with the inflation rate.
B) The growth rate of the money supply determines the inflation rate.
C) Real variables are heavily influenced by the monetary system.
D) The real interest rate adjusts one for one with the inflation rate.

Question

Quizplus · Accepted Answer

The Fisher effect implies that the nominal interest rate adjusts one for one with the inflation rate, meaning that if inflation increases, the nominal interest rate will increase by the same amount to maintain the real interest rate.

What Does the Fisher Effect Imply