Discuss the relationship between bond prices and interest rates. What impact do changing interest rates have on the price of lon
1 answer:
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Answer:
The inflation will increase
Explanation:
The formula derived by the Quantity theory of money is as under:
P = MV/T
P - The price of goods or product which also includes the inflation factor.
M - M is the supply of the money in an economy
V - V is the velocity of the money circulation
T - Transaction Value
So if the Supply of money is increasing with 10%, T is growing with 3 percent (denominator) and the V is also growing with faster rates then this means that the nominator will increase with higher rates than the nominator. So this will increase the price which means inflation will be increasing.
