A change in expected inflation affects both the supply and demand for bonds.

Name: A change in expected inflation affects both the supply and demand for bonds.
Brand: Quizplus
Rating: 4.8 (42 reviews)

Question

Quizplus · Accepted Answer

Expected inflation affects the supply of bonds because higher inflation expectations make borrowing more attractive to issuers, increasing supply. It affects demand because higher inflation expectations reduce the real return on bonds, making them less attractive to investors, thus decreasing demand.

A Change in Expected Inflation Affects Both the Supply and Demand