The interest rate is positively correlated with the inflation rate.

Name: The interest rate is positively correlated with the inflation rate.
Brand: Quizplus
Rating: 5.0 (45 reviews)

Question

Quizplus · Accepted Answer

This is because when inflation increases, the purchasing power of money decreases, leading to an increase in demand for money to maintain the same level of purchasing power. This increased demand for money leads to an increase in interest rates to balance the supply and demand of money in the economy.

The Interest Rate Is Positively Correlated with the Inflation Rate