Inflation is independent of interest rates and does not affect interest rates.

Question

Quizplus · Accepted Answer

Inflation and interest rates are closely related. When inflation increases, interest rates tend to increase as well as investors demand higher returns to compensate for the loss of purchasing power caused by inflation. Conversely, when inflation is low, interest rates tend to be low as well as investors do not require high returns to compensate for loss of purchasing power.

Inflation Is Independent of Interest Rates and Does Not Affect