Velocity Will Decline If

question 67

Multiple Choice

Velocity will decline if

• A)the public becomes more confident about the economy's future.
• B)there is an increase in the use of credit cards.
• C)automatic teller machines become more accessible.
• D)the crime rate increases.
• E)banks increase the interest rate paid on checking deposits.

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Definitions:

Nominal Rate

The stated interest rate of an investment or loan, not including the effect of compound interest or inflation adjustments.

Monthly Compounded

A method of calculating interest where the interest is added to the principal each month, resulting in interest earned on interest.

Nominal Rate

The stated interest rate of a bond or loan, not adjusted for inflation.

Compounded Annually

A method in which interest is calculated once per year and added to the total sum, affecting the principal for the next period.