1. Cost of money Everyone uses money, and it is important to understand what fac

Question

1. Cost of money Everyone uses money, and it is important to understand what factors affect the cost of money. Consider the following scenario: Due to recent political and economic events, general prices of goods and services are expected to increase significantly over the next five years. You were about to purchase a five-year bond. You now require a higher return on the bond than you did before you found out about these expected price increases Determine which of these fundamental factors is affecting the cost of money in the scenario described: O Time preferences for consumption O Inflation O Risk

Explanation / Answer

Correct option is > Inflation

General rise in price of goods and services signifies inflation.

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