Positive feedback is a process that occurs in a feedback loop in which the effects of a small disturbance on a system include an increase in the magnitude of the perturbation. That is, A produces more of B which in turn produces more of A.
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Fisher equation is implemented in financial mathematics and economics to project the accord between nominal interest rate and real interest rate depending on inflation. This equation is dedicated on the name of acclaimed American economist, Irving Fisher, who has gained his popularity for his brilliant works in theory of interest.
In mathematical terms, the equation goes like this,
real rate of interest + inflation rate = nominal rate of interest.
Monetary Economics, 2nd Edition By Jagdish Handa (published by Routledge, 2008)
Consumer Price Index Manual: Theory and Practice (EPub) By International Monetary Fund (published by International Monetary Fund, 2004)
Here a few practical usage of this finance concept in practical life, with the given two examples the fundamentals of Fisher equation can be described,
it = rt+1 + πt+1, which comes to the conclusion that an ex-ante variable as the sum of two ex-post variables.
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