Other Things Constant, If There Is an Increase in the Demand

question 101

Multiple Choice

Other things constant, if there is an increase in the demand for goods now compared to goods in the future, we would expect that the

• A) real interest rate would decline.
• B) capital investment rate would decline.
• C) current rate of saving would increase.
• D) real interest rate would rise.

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Definitions:

Registrar

is an organization or entity responsible for keeping records of bondholders and shareholders for companies and financial institutions.

Default Risk Premium

The portion of a nominal interest rate or bond yield that represents compensation for the possibility of default.

Inflation Premium

The extra yield on an investment that investors require as compensation for the loss of purchasing power due to inflation.

Bond Payments

The regular interest payments made to bondholders, as well as the return of principal at the bond's maturity date.