-In the figure above,the price of bonds would fall from P1 to P2 if ________.
A) inflation is expected to increase in the future
B) interest rates are expected to fall in the future
C) the expected return on bonds relative to other assets is expected to increase in the future
D) the riskiness of bonds falls relative to other assets

Question

-In the figure above,the price of bonds would fall from P1 to P2 if ________.
A) inflation is expected to increase in the future 
B) interest rates are expected to fall in the future 
C) the expected return on bonds relative to other assets is expected to increase in the future 
D) the riskiness of bonds falls relative to other assets

Quizplus · Accepted Answer

If inflation is expected to increase, the real return on bonds decreases, leading to a decrease in demand and a fall in bond prices.

-In the Figure Above,the Price of Bonds Would Fall from P1