Which of the following statements is CORRECT?
A. If expected inflation increases, interest rates are likely to increase.
B. If individuals in general increase the percentage of their income that they save, interest rates are likely to increase.
C. If companies have fewer good investment opportunities, interest rates are likely to increase.
D. Interest rates on all debt securities tend to rise during recessions because recessions increase the possibility of bankruptcy, hence the riskiness of all debt securities.
E. Interest rates on long-term bonds are more volatile than rates on short-term debt securities like T-bills.
Answer: A
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