1)

1. Which of the following is correct about the variables in the Fisher equation? (1 mark)

A. The real interest rate measures the percentage change in purchasing power.

B. The nominal interest rate measures the percentage change in the prices for goods and services.

C. There is always a positive relationship between the inflation rate and the real interest rate.

D. The real interest rate in the Fisher equation is the same as the effective interest rate used to find the future value of cash flows.