According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the expected inflation rate. So, the correct answer is B. expected inflation rate.

Here's a step-by-step explanation:

1. The Fisher effect is an economic theory proposed by economist Irving Fisher, which suggests a relationship between inflation and both real and nominal interest rates.

2. The theory states that the real interest rate is equal to the nominal interest rate minus the expected inflation rate. In other words, Real Interest Rate = Nominal Interest Rate - Expected Inflation Rate.

3. Therefore, if the expected inflation rate increases, the nominal interest rate would also increase to keep the real interest rate constant. This is what is meant by the nominal interest rate moving one-for-one with the expected inflation rate.

4. So, if we expect inflation to rise by 2%, then according to the Fisher effect, nominal interest rates would also rise by 2% to keep the real interest rate unchanged.

5. This is why the correct answer is B. expected inflation rate. The nominal interest rate does not move one-for-one with actual inflation, ex ante real interest rate, or ex post real interest rate.

Question

According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the expected inflation rate. So, the correct answer is B. expected inflation rate.

Here's a step-by-step explanation:

1. The Fisher effect is an economic theory proposed by economist Irving Fisher, which suggests a relationship between inflation and both real and nominal interest rates.

2. The theory states that the real interest rate is equal to the nominal interest rate minus the expected inflation rate. In other words, Real Interest Rate = Nominal Interest Rate - Expected Inflation Rate.

3. Therefore, if the expected inflation rate increases, the nominal interest rate would also increase to keep the real interest rate constant. This is what is meant by the nominal interest rate moving one-for-one with the expected inflation rate.

4. So, if we expect inflation to rise by 2%, then according to the Fisher effect, nominal interest rates would also rise by 2% to keep the real interest rate unchanged.

5. This is why the correct answer is B. expected inflation rate. The nominal interest rate does not move one-for-one with actual inflation, ex ante real interest rate, or ex post real interest rate.

Knowee AI · Accepted Answer

According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the expected inflation rate. So, the correct answer is B. expected inflation rate.

Here's a step-by-step explanation:

1. The Fisher effect is an economic theory proposed by economist Irving Fisher, which suggests a relationship between inflation and both real and nominal interest rates.

2. The theory states that the real interest rate is equal to the nominal interest rate minus the expected inflation rate. In other words, Real Interest Rate = Nominal Interest Rate - Expected Inflation Rate.

3. Therefore, if the expected inflation rate increases, the nominal interest rate would also increase to keep the real interest rate constant. This is what is meant by the nominal interest rate moving one-for-one with the expected inflation rate.

4. So, if we expect inflation to rise by 2%, then according to the Fisher effect, nominal interest rates would also rise by 2% to keep the real interest rate unchanged.

5. This is why the correct answer is B. expected inflation rate. The nominal interest rate does not move one-for-one with actual inflation, ex ante real interest rate, or ex post real interest rate.

According to the Fisher effect, the nominal interest rate moves one-for-one with changes in the:A.inflation rate.B.expected inflation rate.C.ex ante real interest rate.D.ex post real interest rate

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