Question: Use the figure to answer the question You are a financial analyst for the Federal Reserve Bank. One of your duties is to forecast future

Use the figure to answer the question

Use the figure to answer the question You are a financial analyst

You are a financial analyst for the Federal Reserve Bank. One of your duties is to forecast future inflation. If you see the 20 year bond move from A to B on the graph, base on the expectations hypothesis, you would expect

A. future inflation to be lower, because bond prices are rising.

B. future inflation to be higher, because bond prices are falling.

C. future inflation to be lower, because bond prices are falling.

D. future inflation to be higher, because bond prices are rising.

thank you in advance!

YTM o B Maturity 1 year 20 year

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