Concept:Inflation reduces the purchasing power of money, so lenders demand higher compensation and authorities raise rates to control rising prices.
Explanation:During inflation, the general price level rises continuously.
To reduce the excess money supply in the economy, the central bank increases interest rates.
Higher interest rates make borrowing costlier, which discourages excessive spending.
This helps bring inflation under control.
At the same time, higher interest rates protect lenders from the falling real value of money.
Therefore, interest rates tend to rise during inflation.
Answer:A. rise