If People Expect Nominal Interest Rates to Be Higher in the Future

question 1

Multiple Choice

If people expect nominal interest rates to be higher in the future, the expected return on bonds ________, and the demand for money ________.

• A) rises; increases
• B) rises; decreases
• C) falls; increases
• D) falls; decreases

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Definitions:

Attention

The cognitive process of selectively concentrating on one aspect of the environment while ignoring other things.

Selectively

The act of choosing specific items or data while ignoring others based on certain criteria.

Consciousness

The state of being aware of and able to think about one's own existence, sensations, thoughts, surroundings, and experiences.

Short-term Memory

A capacity for holding a small amount of information in mind in an active, readily available state for a short period of time.