-In the figure above,the decrease in the interest rate from i₁ to i₂ can be explained by A)a decrease in money growth. B)a decline in the expected price level. C)an increase in income. D)an increase in the expected price level.

Question

Quizplus · Accepted Answer

A decline in the expected price level can lead to a decrease in interest rates as it reduces inflation expectations, which in turn can lower nominal interest rates.

-In the Figure Above,the Decrease in the Interest Rate from I1

-In the Figure Above,the Decrease in the Interest Rate from I₁