Under the assumptions of the Fisher effect and monetary neutrality,if the money supply growth rate falls,then
A)both the nominal and the real interest rate fall.
B)neither the nominal nor the real interest rate fall.
C)the nominal interest rate falls,but the real interest rate does not.
D)the real interest rate falls,but the nominal interest rate does not.

Question

Quizplus · Accepted Answer

According to the Fisher effect, a decrease in the money supply growth rate leads to a decrease in the nominal interest rate, while the real interest rate remains unchanged due to monetary neutrality.

Under the Assumptions of the Fisher Effect and Monetary Neutrality,if