If the Nominal Interest Rate Is Above Its Equilibrium Value

question 42

Multiple Choice

If the nominal interest rate is above its equilibrium value, then

• A)people sell financial assets and the interest rate falls.
• B)the demand curve for money shifts leftward and the interest rate falls.
• C)people buy financial assets and the interest rate falls.
• D)the supply curve of money shifts leftward and the interest rate rises.
• E)the demand curve for money shifts rightward and the interest rate rises.

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Definitions:

Future Value

The future value of an asset or cash that, on a specific future date, is equal in worth to a given amount today.

Cash Flow

The total financial movement entering and exiting a business, substantially affecting its operational liquidity.

Present Value

The current value of a future amount of money or a series of future payments, discounted at a specific rate.

Future Value

The value of an asset or cash at a specific date in the future that is equivalent in value to a specified sum today.