If people expect nominal interest rates to be higher in the future,the expected return to bonds ________,and the demand for money ________.
A)rises;increases
B)rises;decreases
C)falls;increases
D)falls;decreases

Question

Quizplus · Accepted Answer

If people expect nominal interest rates to be higher in the future, the expected return on bonds falls because the price of existing bonds will decrease. Consequently, people will prefer to hold more money instead of bonds, leading to an increase in the demand for money.

If People Expect Nominal Interest Rates to Be Higher in the Future,the