Graph the three-month Treasury bill interest rate, the ten-year government bond interest rate, and the CPI inflation rate (based on the percentage change in the CPI from one year earlier) on the same figure, using data since 1961. Make sure that the units are comparable.

a. In general, how are changes in interest rates related to changes in inflation? Why?

b. Is the three-month rate or the ten-year rate more sensitive to current changes in inflation? Give an economic explanation.