Figure 22-5 Use the Graph Below to Answer the Following Questions

question 57

Multiple Choice

Figure 22-5
Use the graph below to answer the following questions.
-Refer to Figure 22-5. If the economy starts at C and the money supply growth rate increases, then in the short run the economy moves to

• A)B.
• B)D.
• C)F.
• D)None of the above is consistent with an increase in the money supply growth rate.

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Definitions:

Modified Duration

A formula that predicts the change in a bond's price for a 1% change in interest rates, considering the bond's yield to maturity.

Basis Points

A unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument, equal to 0.01%.

Declining Interest Rates

A situation in which the general level of interest rates in the economy is decreasing, affecting borrowing costs, investment returns, and economic activity.

Capital Gain

The profit realized from the sale of a capital asset, such as stock or real estate, when the selling price exceeds the original purchase price.