-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

-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

Quizplus · Accepted Answer

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

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