The Fisher Effect States That

Multiple Choice

The Fisher effect states that

A) a country's "nominal" interest rate (i) is the sum of the required "real" rate of interest (r) and the expected rate of inflation over the period for which the funds are to be lent (I) .
B) by comparing the prices of identical products in different currencies,it is possible to determine the "real" or purchasing power parity exchange rate that would exist if markets were efficient.
C) a country in which price inflation is running wild should expect to see its currency depreciate against that of countries in which inflation rates are lower.
D) when the growth in a country's money supply is faster than the growth in its output,price inflation is fueled.
E) in competitive markets free of transportation costs and trade barriers,identical products sold in different countries must sell for the same price.