If people believe inflation is likely to increase sharply over the next few months, which of the following is likely to occur?
A) Current consumption will fall.
B) Current consumption will rise.
C) Government spending will increase.
D) Interest rates will fall.

Question

Quizplus · Accepted Answer

If people anticipate higher inflation, they are likely to spend more now to avoid higher prices later, thus increasing current consumption.

If People Believe Inflation Is Likely to Increase Sharply Over