Fisher+Effect

__**Fisher Effect**__


 * nomial interest rates are based on anticipated inflation in the foreseeable future. To calculate the nominal interest you need to: **Nominal interest Rate (i) = Real interest rate+inflation**
 * example 1. 3.00%=1.00%+2.00% 2. 5.00%=3.00%+2.00%**
 * Prime rate right now is 3.00% and the anticapted to increase to 4.00% by December of this year because of inflation
 * If we have def;atopm you will see that the nominal interest rate decreased, we have seen this in the past few years
 * Interest rates and inflation are everywhere, meaning ever country in the world experience these things.
 * According to the fisher effect theory there is a relationship between inflation rates and nominal interest rates and when one increases you will most likely see that the other one will increase.
 * If the current is hight we expect more high inflation then, lenders will raise their nominal interest inerest rate to keep their buying power the same while; borrowers are willing to pay higher rates. When there is inflation to compensate the lender for the loss in value during the time the money is on loan.
 * According to wisegeek.com, "one exampler of this would be consider a country's rising inflation rate. If a nation's inflation rate increases by 1 percent, the Fisher effect states that the interest rate also will rise by 1 percent." http:www.wisegeek.com/what-is-the-fisher-effect.htm
 * This site also goes on explain how to compare different nations' currency based on interest rates. "A slightly enhanced version of the Fisher effect allows for economists to compare two nations' currencies based on interest rates. The International Fisher effect states the difference between two countries' interest rates will directly affect the exchange rate between those two currencies. In this hypothesis, the value of the currency with the lower nominal inteest tate will increase because of the other country's higher rate."http:www.wisegeek.com/what-is-the-fisher-effect.htm
 * Irving Fisher was the man that was the founder of the Fisher Effect. He was an economist from the Untied States, and graduated from Yale University in 1888. Irving Fisher became one of the best known economists of this current time all becuase of his theory. He also was the founder of the deflation theory in economics. Irving Fisher passed away in 1947 at the age of 80. His therories are taught in economics still today. http:www.wisegeek.com/what-is-the-fisher-effect.htm