All else being equal,an increase in inflation will cause investors to require a higher rate of return on an asset.

Question

Quizplus · Accepted Answer

Inflation erodes the value of money over time, so investors will demand a higher rate of return to compensate for the loss of purchasing power caused by inflation. Therefore, all else being equal, an increase in inflation will cause investors to require a higher rate of return on an asset.

All Else Being Equal,an Increase in Inflation Will Cause Investors