Does The Fisher Equation Imply That This Increase Will Result In A Fall In The Real Ra…
Does the Fisher equation imply that this increase will result in a fall in the real rate of interest
Answer:
Yes because the Fisher Effect is an economic theory created by economist Irving Fisher that describes the relationship between inflation and both real and nominal interest rates. The Fisher Effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate. Therefore, real interest rates fall as inflation increases, unless nominal rates increase at the same rate as inflation.
Step-by-step explanation:
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