The Fisher Effect States That

question 81

Multiple Choice

The Fisher Effect states that

• A) a country's "real" rate of interest is the sum of the "nominal" interest rate and the expected rate of inflation over the period for which the funds are to be lent.
• B) there is a weak relationship between inflation rates and interest rates.
• C) a country's "nominal" interest rate is the sum of the required "real" rate of interest and the expected rate of inflation over the period for which the funds are to be lent.
• D) when investors are free to transfer capital between countries, "nominal" interest rates will be the same in every country.