Answer:
According to an article in the Wall Street Journal in early 2016, "U.S. government bonds maturing in more than 25 years returned a negative 1.2% in the month through Thursday after chalking up a 8.7% gain between January and March.The reversal reflects a shift in financial markets' preoccupation from the prospect of a recession to the risk of higher inflation." Source: Min Zeng, "It Didn't Pay to Bet Against Inflation in April," Wall Street Journal, April 29, 2016
An increase in expected inflation will shift the demand curve _______ leftward rightward and the supply curve _______ rightward leftward , resulting in a new equilibrium with a _____________ lower higher price.
An increase in expected inflation will ____________ decrease increase the nominal interest rate on both short-term and long-term bonds. The longer the maturity of a bond, the ___________ greater less the change in price as a result of a change in market interest rates. As a result, capital losses on long-term bonds will be ______ less greater than capital losses on short-term bonds.
Step-by-step explanation:
Inflation is the rise in the general level of prices where a dollar unit effectively buys less than it did in prior periods. One feature of inflation is that the value of money reduces with rising prices of goods and services unless the interest rates are higher than the inflation rate. Inflation dampens overall market demand.