Question

In countries where inflation is expected to be high, interest rates also will be high, because investors want compensation for the decline in the value of their money. This relationship is referred to as the___________.

Answer 1

Answer:

Fisher effect

Explanation:

Fisher effect is the effect in the economic theory that is established by the economist Irving Fisher, which states the relationship among the inflation and both nominal and the real interest rates.

This effect state that the real rate of interest equals to the nominal rate of interest deduct the expected inflation rate.

So, the relationship which is mentioned in the question is the fisher effect as it state the rate of interest that reflect the expectations likely the future inflation rates.