A Decrease in the Nominal Interest Rate Would

question 17

Multiple Choice

A decrease in the nominal interest rate would

• A) encourage people to hold larger money balances.
• B) encourage people to hold smaller money balances.
• C) force the Fed to increase the money supply.
• D) cause households to decrease consumption.

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Definitions:

Empiricism

A philosophical stance positing that knowledge comes primarily from sensory experience.

Structuralism

An early school of psychology that aimed to understand the structure of the mind by analyzing the basic components of thoughts and sensations.

Empiricists

Philosophers who emphasize that knowledge comes primarily from sensory experience.

Proximal Stimuli

The patterns of stimuli from objects and events that actually reach your senses (eyes, ears, skin, etc.), influencing perception.