If inflationary expectations are increasing,we would expect that the nominal interest rate would also be increasing,holding all else constant.

Question

Quizplus · Accepted Answer

This is because as inflationary expectations increase, lenders will demand a higher interest rate to compensate for the decreased purchasing power of the loan repayment in the future. This increased nominal interest rate helps to keep the real interest rate (the nominal rate adjusted for inflation) relatively constant.

If Inflationary Expectations Are Increasing,we Would Expect That the Nominal