When investors expect __________ inflation rates they will require __________ nominal interest rates so that a real rate of return will remain after the inflation.

Question

Quizplus · Accepted Answer

When investors expect higher inflation rates, they will require higher nominal interest rates to compensate for the decrease in purchasing power of the money they receive in the future due to inflation. This ensures that they earn a positive real rate of return after accounting for inflation.

When Investors Expect __________ Inflation Rates They Will Require __________

When Investors Expect Inflation Rates They Will Require