Inflation has increased to new highs in recentyears. How doesexpectation of higher inflation in the coming yearsaffect interestrates?O A. Demand for bonds declines while supply ofbonds rises resulting in highernominal interest rates in the market.O B. Higher expectation of inflation will lowerdemand for money causing interestrates to decline in the futureO C. Demand for bonds rises ip the expectation ofhigher nominal interest ratesleading to a rise in the interest rate.O D. Demand for bonds increases while supply ofbonds declines leading to ahigher nominal interest rate.

A increase in expected inflation rate will result in higher interest rates.In fact, given that…

Inflation has increased to new highs in recent years. How does expectation of higher inflation in the coming years affect interest rates? O A. Demand for bonds declines while supply of bonds rises resultina in hiaher

Inflation has increased to new highs in recent years. How does expectation of higher inflation in the coming years affect interest rates? O A. Demand for bonds declines while supply of bonds rises resultina in hiaher

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

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Question

Inflation has increased to new highs in recent
years. How does
expectation of higher inflation in the coming years
affect interest
rates?
O A. Demand for bonds declines while supply of
bonds rises resulting in higher
nominal interest rates in the market.
O B. Higher expectation of inflation will lower
demand for money causing interest
rates to decline in the future
O C. Demand for bonds rises ip the expectation of
higher nominal interest rates
leading to a rise in the interest rate.
O D. Demand for bonds increases while supply of
bonds declines leading to a
higher nominal interest rate.

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