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The Current Rate of Inflation Affects the Expected Level of Interest

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The current rate of inflation affects the expected level of interest rates via the Fisher Effect.


Definitions:

Friedman and Phelps

Economists known for their work on the natural rate of unemployment and expectations in macroeconomics, challenging the traditional Phillips curve concept.

Phillips Curve

An economic concept that depicts an inverse relationship between the rate of unemployment and the rate of inflation in an economy over time.

Phillips Curve

An economic concept that demonstrates an inverse relationship between the rate of unemployment and the rate of inflation within an economy.

Short-Run Aggregate Supply

The total supply of goods and services that firms in an economy plan on selling during a short period, assuming some prices/wages are sticky.

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