Question 36
Money and InflationIf inflation is anticipated to continue
- A.people will lose confidence in goods
- B.lenders will demand higher interest rates
- C.the growth of full-employment output will be accelerated
- D.people will want to hold more money.
Show the answer and explanation
Answer: B (lenders will demand higher interest rates)
Explanation
Inflation reduces the value of the money lenders are repaid, so they ask for higher interest to make up for it.