When the inflation rate is expected to increase,the ________ for bonds falls,while the ________ curve shifts to the right,everything else held constant.
A)demand;demand
B)demand;supply
C)supply;demand
D)supply;supply

Question

Quizplus · Accepted Answer

When the inflation rate is expected to increase, the demand for bonds falls as investors prefer to hold tangible assets like real estate or commodities to protect against inflation. This decrease in demand for bonds shifts the demand curve to the left. On the other hand, the increase in inflation expectations increases the supply of bonds as borrowers issue more bonds to take advantage of the higher prices. This increase in supply shifts the supply curve to the right. Therefore, the correct answer is B (demand; supply).

When the Inflation Rate Is Expected to Increase,the ________ for Bonds