Suppose There Is an Increase in the Expected Future Interest

question 29

Multiple Choice

Suppose there is an increase in the expected future interest rate. This will cause which of the following to occur?

• A) The IS curve to shift left in the current period.
• B) The IS curve to shift right in the current period.
• C) The LM curve to shift up in the current period.
• D) The LM curve to shift down in the current period.
• E) Both the IS and LM curves to shift left in the current period.

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Definitions:

Compounded Quarterly

The process of calculating interest on both the initial principal and the accumulated interest from previous periods four times a year.

Annual Percentage Rate

A measure that represents the actual yearly cost of funds over the term of a loan, including any fees or additional costs associated with the transaction.

Overdraft Fee

A charge imposed by a bank when a transaction exceeds the account's available balance, resulting in a negative balance.

Maintenance Fee

A periodic charge imposed by banks, credit unions, or HOAs to cover the cost of services or upkeep.