Which of the following is best associated with interest rate movements and inflation?
A) Interest rates move inversely with inflation.
B) Interest rates vary directly with expected inflation.
C) Interest rates vary directly with past inflation rates.
D) Inflation is impacted by expected interest rates.

Question

Quizplus · Accepted Answer

Interest rates typically vary directly with expected inflation because lenders demand higher rates to compensate for the decrease in purchasing power of money due to inflation.

Which of the Following Is Best Associated with Interest Rate