An Increase in the Nominal Interest Rate Would

question 30

Multiple Choice

An increase in the nominal interest rate would

• A) encourage people to hold smaller money balances.
• B) encourage people to hold larger money balances.
• C) force the Fed to reduce the money supply.
• D) cause the real interest rate to decline.

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Definitions:

Sales Discount

A reduction in the price of goods or services offered to customers, typically to prompt early payment or bulk purchases.

Gross Profit

The difference between sales revenue and the cost of goods sold, indicating the profitability of selling goods and services.

Net Income

The total profit of a company after all expenses and taxes have been deducted from total revenues.

Bad Debt Expense

An estimate of the accounts receivable that a company does not expect to collect, recognized as an expense.