A decline in expected inflation will likely lead to
A)both GDP and interest rates rising
B)an increase in GDP but decrease in interest rates
C)both GDP and interest rates falling
D)an increase in interest rates but decrease in GDP

Question

Quizplus · Accepted Answer

A decline in expected inflation typically leads to lower interest rates as central banks may ease monetary policy in response, which can stimulate investment and consumption, thereby increasing GDP. Conversely, lower expected inflation makes holding money more attractive relative to borrowing, contributing to the decrease in interest rates.

A Decline in Expected Inflation Will Likely Lead to