Discuss the effects on stock and bond markets if inflation starts rising.

State why a loose monetary policy, meaning that Central banks are encouraging banks to lend more money ''today that yesterday,'' might increase inflation.

Apply the liquidity premium to the discussion and its effects on interest rates, bond yields, and prices of stocks (in relation to discount rates), and bond prices. Is the difference possibly the same for short-term bonds and long-term bonds?

Would short-term rates rise or fall more than long-term rates? Why? Provide arguments.

How would such a situation affect the general economy as a whole? Provide arguments