This preview shows page 1. Sign up to view the full content.
Unformatted text preview: 2. Describe how interest rates may adjust to an unanticipated increase in inflation. If an unanticipated increase in inflation, lenders (suppliers) to require a higher rate of interest. But we cant take into consideration the fact that borrowers also may adjust their demand for loanable funds. If the borrowers cut back on their demand for loadable funds, the new equilibrium rate will be the same to the equilibrium that an unanticipated increase in inflation....
View Full Document
This note was uploaded on 11/01/2011 for the course ACC 200 taught by Professor Minliu during the Spring '11 term at Universidad Europea de Madrid.
- Spring '11