Question

1. If Japanese interest rate goes up and US interest rate remains unchanged, 2. According to Fisher effect, if nominal interest rate goes up by 1%, then 3. According to Fisher effect, if expected inflation rate goes up by 1%, then 4. If expected inflation rate goes up, the supply curve for loanable fund will 5. If expected inflation rate goes up, the supply curve for loanable fund will then foreign demand for US loanable funds will increase (true) inflation will also go up by one percent (true) nominal interest rate will also go up by one percent (true) shift to the left (true) shift up (true)

Please check my answers and explain if they are wrong?

Answer 1

1. Your answer is correct.

2.Your answer is correct. As the Fisher effect, actually claims that the real interest rate equals the nominal interest rate minus the expected inflation rate. Therefore any change in nominal interest rate will have change in inflation rate.

3.Your answer is correct.As the Fisher effect, actually claims that the real interest rate equals the nominal interest rate minus the expected inflation rate. Therefore any change in inflation rate will have change in nominal interest rate.

4. The answer should be false as in case the expected inflation rate increases, the demand curve will shift to the left, and the supply curve will shift to the right.

5.The answer should be false.  An increase in the expected inflation rate causes the supply curve to shift down to the right