An Increase in Expected Inflation for Any Given Nominal Interest

question 117

Multiple Choice

An increase in expected inflation for any given nominal interest rate will cause:

• A) the real return to bondholders to decrease.
• B) a movement down the bond demand curve, but no change in the bond demand curve.
• C) the bond demand curve to shift right.
• D) the price of bonds to increase.

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Definitions:

Social Security

A government program designed to provide financial assistance and support to people with insufficient or no income, especially the elderly, disabled, and unemployed.

Retirement Finances

Financial planning and management concerning the period of life when one is no longer working, focusing on income sources, savings, and investment strategies.

Collectivism

A cultural system that values the needs of the group more than those of the individual self.

Socialist Countries

Nations where the government exercises significant control over the economy, often including ownership and management of production means, and prioritizes social equity.