In well developed economies, markets are not affected by changes in expected inflation.

Question

Quizplus · Accepted Answer

Changes in expected inflation can have an impact on markets in well developed economies. For example, if inflation is expected to increase, investors may demand higher returns on their investments to compensate for the loss of purchasing power due to higher prices. This can lead to increased interest rates and potentially slower economic growth. Additionally, changes in inflation expectations can affect the behavior of central banks, which may adjust monetary policy in response to changes in inflation expectations.

In Well Developed Economies, Markets Are Not Affected by Changes