Question

What is the Fisher effect? the tendency of nominal interest rates to rise with higher expected inflation rates the tendency of real interest rates to fall with higher expected inflation rates the tendency of nominal interest rates to fall with higher expected inflation rates the tendency of real interest rates to rise with higher expected inflation rates

Answer 1

Answer:

The Tendency of Real Interest Rates to fall as Inflation increases.

Explanation:

The Fisher Effect examines the relationship between inflation, nominal and real interest rates. The real interest rate is obtained by deducting inflation rate from nominal interest rate. Except nominal interest rate increases at the same rate as inflation, real interest rate would decrease.