The Fisher effect is defined as the relationship between which of the following

Question

The Fisher effect is defined as the relationship between which of the following variables?

real rates, inflation rates, and nominal rates

default risk premium, inflation risk premium, and real rates

nominal rates, real rates, and interest rate risk premium

real rates, interest rate risk premium, and nominal rates

interest rate risk premium, real rates, and default risk premium

real rates, inflation rates, and nominal rates

default risk premium, inflation risk premium, and real rates

nominal rates, real rates, and interest rate risk premium

real rates, interest rate risk premium, and nominal rates

interest rate risk premium, real rates, and default risk premium

Explanation / Answer

Answer is "real rates, inflation rates, and nominal rates"

The Fisher effect is an economic theory proposed 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.

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