An increase in an indicator of inflation such as the consumer price index may create expectations...

An increase in an indicator of inflation such as the consumer price index may create expectations of ________ interest rates and place _______ pressure on the prices of money market securities.

Group of answer choices

1.higher; downward

2.lower; downward

3.lower; upward

4.higher; upward

Solutions

Expert Solution

The correct answer is Higher, Downward

When there is increase the inflation or it indicators then it shows that interest rate is going to rise in future because investor would demand higher interest rate in form of compensation as the value of money will be depreciating. The demand for money market will be lowered as the cost of borrowing will went up, so people would be less willing to borrow money.

jeff jeffy answered 2 years ago

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