When market participants see the economy going into an expansion, they most likely expect
A)falling interest rates.
B)stabilizing future interest rates.
C)rising future interest rates.
D)falling future interest rates.

Question

Quizplus · Accepted Answer

When the economy is going into an expansion, there is an expectation of increased economic activity, which can lead to higher inflation. In order to combat inflation, central banks may raise interest rates, leading to a rise in future interest rates. Therefore, market participants most likely expect rising future interest rates in an expanding economy.

When Market Participants See the Economy Going into an Expansion