An increase in the expected inflation rate causes the supply of bonds to ________ and the supply curve to shift to the ________,everything else held constant.
A)increase;left
B)increase;right
C)decrease;left
D)decrease;right

Question

Quizplus · Accepted Answer

An increase in the expected inflation rate makes borrowing more attractive because the real cost of borrowing decreases. This leads to an increase in the supply of bonds, shifting the supply curve to the right.

An Increase in the Expected Inflation Rate Causes the Supply