If Real GDP Falls and the Nominal Interest Rate Rises

question 9

Multiple Choice

If real GDP falls and the nominal interest rate rises, then the equilibrium price level

• A) Must fall.
• B) Must rise.
• C) Will fall if the effect of the decline in real GDP dominates.
• D) Will fall if the effect of the increase in the nominal interest rate dominates.

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Definitions:

Diversification

A strategy for managing risk that diversifies by incorporating a broad range of investments in a single portfolio.

Market Development

A growth strategy where a company seeks to increase sales by promoting existing products in new markets or new segments of current markets.

Product Development

The process of bringing a new product or service to the market, from initial concept through design, prototype, testing, and finally, launch.

Market Penetration

A strategy aiming to increase market share within an existing market segment by using methods such as pricing adjustments, increased promotion, and product improvements.