During periods when inflation is increasing,interest rates tend to increase,while interest rates tend to fall when inflation is declining.

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Quizplus · Accepted Answer

This relationship between inflation and interest rates is known as the Fisher effect. When inflation is increasing, investors demand a higher return on their investments to account for the eroding value of money over time. This higher demand for returns leads to an increase in interest rates. Conversely, when inflation is declining, interest rates tend to fall as investors require a lower return to account for the decreasing impact of inflation on the value of money.

During Periods When Inflation Is Increasing,interest Rates Tend to Increase,while