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5. The Fisher effect The Fisher effect explains the relationship between interest rates and expected inflation. Which of the following equations best exemplifies the Fisher

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5. The Fisher effect The Fisher effect explains the relationship between interest rates and expected inflation. Which of the following equations best exemplifies the Fisher effect? Oi=i+E(INF) O E(INF) =i-ic O ir=i-E(INF) OiE(INF) IR Suppose in a hypothetical economy, the nominal interest rate is 10% and the expected inflation rate is 4%. The real interest rate is: 0 -6% 0 -4% O 2% O 6%

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