If the consensus in securities markets is that a previous increase in the money supply will be inflationary, the likely result will be
A) higher real interest rates.
B) higher nominal interest rates.
C) lower real interest rates.
D) lower nominal interest rates.

Question

Quizplus · Accepted Answer

When the consensus in securities markets is that a previous increase in the money supply will be inflationary, investors and lenders will demand higher nominal interest rates to compensate for the expected decrease in the purchasing power of money, leading to higher nominal interest rates.

If the Consensus in Securities Markets Is That a Previous