Definition – What is the fisher equation?
The fisher equation connects the relationship between real interest rates, nominal interest rates, and inflation.
Formula – How to calculate the fisher equation
Nominal Interest Rate = Real Interest Rate + Inflation
Real Interest Rate is 4.25% and inflation rate is 1.75%.
Nominal Interest Rate = 4.25% + 1.75% = 6.00%
Therefore, the nominal interest rate is 6.00%.
Sources and more resources
- Wikipedia – Fisher Equation – Details on the fisher equation.
- Theory and Applications of Macroeconomics – 16.14 The Fisher Equation: Nominal and Real Interest Rates – Some of the equations used for the fisher equation.
- jodiecongirl (YouTube) – The Fisher Effect – An overview video of the fisher equation and how it is calculated.
- TheWyvern66 (YouTube) – The Fisher Equation – Another overview of the fisher equation and how it is calculated.