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

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Definitions:

Hydrophobic

Describes a substance that resists dissolving in water.

Phospholipid

A lipid with two (hydrophobic) fatty acid tails and a (hydrophilic) phosphate group in its head; main constituent of lipid bilayers that form cell membranes.

Aqueous

Aqueous describes something that is related to, composed of, or dissolved in water.

Scanning Electron Micrograph

An image produced using a scanning electron microscope to examine surfaces of materials at high magnification.