When Expected Inflation Increases, for Any Given Nominal Interest Rate

question 74

Multiple Choice

When expected inflation increases, for any given nominal interest rate:

• A)The cost of borrowing increases and the desire to borrow decreases
• B)The real interest rate increases
• C)The bond supply curve shifts to the left
• D)The cost of borrowing decreases and the desire to borrow increases

---

Definitions:

Inhibitory

Pertaining to a process that restrains or suppresses physiological action or behavior, such as inhibitory neurotransmitters in the nervous system.

Excitatory

Pertaining to or causing excitation, often used in the context of neurotransmitters that increase the likelihood of a neuron firing an action potential.

Action Potential

A rapid rise and subsequent fall in voltage or membrane potential across a cellular membrane, a process essential for nerve impulse transmission.

Electrical Voltage

The difference in electric potential between two points, which drives the flow of electric current in a circuit.