An Increase in the Nominal Interest Rate, All Else Held

question 34

Multiple Choice

An increase in the nominal interest rate, all else held constant, will always cause which of the following?

• A) The demand for money to decrease.
• B) The expected inflation rate to decrease.
• C) The real interest rate to decrease.
• D) The demand for money to increase.
• E) The inflation rate to decrease.

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Definitions:

Marginal Revenue Product

the additional revenue generated from using one more unit of a factor of production.

Marginal Revenue Product

The extra income created from using another unit of an element like labor or capital.

Variable Input

Refers to inputs whose quantity can vary in production, affecting the total output.

Diminishing Returns

Diminishing Returns is an economic principle stating that as more investment is made in a particular area, the rate of profit from that investment, after a certain point, begins to decrease.