Typically, nominal interest rates and anticipated inflation rates
A) move in opposite directions.
B) are not related.
C) move in the same direction.
D) are such that the nominal rate is one-half the anticipated rate.

Question

Quizplus · Accepted Answer

Nominal interest rates and anticipated inflation rates typically move in the same direction because nominal interest rates include the real interest rate plus the expected inflation rate. When inflation expectations rise, nominal rates tend to increase to compensate for the decreased purchasing power of future interest payments.

Typically, Nominal Interest Rates and Anticipated Inflation Rates