The Federal Reserve issues a report indicating that future inflation will be higher than had previously seemed likely. As a result
A)the supply curve for bonds shifts to the right.
B)the demand curve for loanable funds shifts to the left.
C)the equilibrium interest rate falls.
D)the equilibrium price of bonds rises.

Question

Quizplus · Accepted Answer

Higher expected inflation increases the cost of borrowing, leading to more bonds being issued, which shifts the supply curve for bonds to the right.

The Federal Reserve Issues a Report Indicating That Future Inflation