Suppose the Interest Rate Is Zero and the Public Expects

question 88

Multiple Choice

Suppose the interest rate is zero and the public expects the price level to fall by 2%. Which of the following statement is true?

• A) The value of money falls by 2%.
• B) Money becomes an interest earning asset; it earns a nominal interest rate of 2%.
• C) Money becomes an interest earning asset; it earns a real interest rate of 2%.
• D) Bonds and money will become perfect substitutes since both are non-interest earning assets.

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Definitions:

IF Function

A logical function in programming and spreadsheet software that returns one value if a condition is true and another value if it's false.

Logical Test

An evaluation in programming and spreadsheet formulas that returns TRUE or FALSE based on a specific condition.

Sparkline Chart

A mini-chart embedded within a cell in a spreadsheet to show a visual summary or trend.

Absolute Cell Reference

In spreadsheet applications, a cell reference that remains constant even if the formula is copied to a different location.