Yes, The Scarlet Letter is a good example of psychological fiction. This is so because there is a relationship between the emotional feelings/mental state of the characters and their external actions in the story.
The Scarlet Letter was set in the 18th/19th century American Puritan society. A woman named Hester Prynne who arrived New England before her husband, Roger Chillingworth committed adultery with a minister named Arthur Dimmesdale.
Instead of owning up to his crime, Dimmesdale hypocritically joined others to pressure Prynne to confess her sins. Dimmesdale later suffered a psychological or mental battle when Roger Chillingworth learned that he committed adultery with his wife and instead of confronting him, slowly tormented him.
Conclusively, The Scarlet Letter can be considered as psychological fiction because, the mental state and feelings of the characters were direct consequences of their actions.
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