Which of the following narratives describe Fisher (Irving) effect?
A. Nominal interest rate is equal to a real interest rate plus an expected inflation rate
B. Real interest rate is equal to nominal interest rate minus expected rate of inflation
C. Exchange rate differential between two currencies is explained by interest - inflation rate differential
D. Exchange rate differential between two currencies is explained by comparative cost advantage and purchasing power parity
1
A, B and C only
2
A and B only
3
C and D only
4
B, C and D only