When the expected inflation rate decreases,the demand for bonds ________,the supply of bonds ________,and the interest rate ________.
A) increases; increases; rises
B) decreases; decreases; falls
C) increases; decreases; falls
D) decreases; increases; rises

Question

Quizplus · Accepted Answer

When the expected inflation rate decreases, the demand for bonds increases because bonds will pay out in future dollars that are worth more in real terms. The supply of bonds decreases as issuers wait for lower interest rates. Consequently, the interest rate falls due to increased demand and decreased supply of bonds.

When the Expected Inflation Rate Decreases,the Demand for Bonds ________,The