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Relationship between inflation and interest rates

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What is the relationship between inflation and interest rates? How does the relationship affect asset prices? How does the unemployment rate affect interest rates? How do changes in interest rates affect the balance of payments? How would inflation and unemployment rates affect your personal investments? (at least 200 words)

Please properly cite your references. thanks.

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Solution Summary

The relationship between inflation and interest rates are provided. The expert determines how change in interest rates affect the balance of payments.

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The relationship between inflation and interest rates is that when inflation increases, interest rate increases. With the interest rate increases, the price of the asset will also increase due to the addition of the increased interest rates to the selling price of the asset. When inflation decreases, interest rate decreases and thus, price of the asset will decrease due to the decrease in the interest rate amounts added to the price of the asset.
When the economy is contracting or ...

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