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WAEC Economics 2016 Question 36

Question 36

Money and Inflation

During inflation, interest rate will

  1. A.rise.
  2. B.fluctuate.
  3. C.remain constant.
  4. D.fall.
Show the answer and explanation

Answer: A (rise.)

Explanation

Lenders demand higher interest to make up for the falling value of money, and central banks raise rates.