A decrease in expected inflation
A)usually leads to falling nominal interest rates.
B)results in increased nominal capital gains on physical assets.
C)will shift the bond demand curve to the left.
D)will shift the supply curve for loanable funds to the left.

Question

Quizplus · Accepted Answer

When expected inflation decreases, investors will demand less compensation for inflation risk. Therefore, the nominal interest rates will fall to reflect this lower inflation expectation.

A Decrease in Expected Inflation