Which circumstance would be most likely to lead to an increase in interest rates in the economy?
A)Households reduce their consumption and increase their savings.
B)The federal government decides to try to stimulate the economy.
C)There is an increase in expected inflation.
D)The economy falls into a recession.

Question

Quizplus · Accepted Answer

An increase in expected inflation would lead to an increase in interest rates as lenders will demand higher rates to compensate for the higher inflation risk. The other options would likely result in a decrease in interest rates.

Which Circumstance Would Be Most Likely to Lead to an Increase