Recall the Application About the Reasons Why Interest Rates Rise

question 19

Multiple Choice

Recall the Application about the reasons why interest rates rise during an economic recovery to answer
the following question(s) . Although higher interest rates are often associated with lower output, interest
rates often start to rise when an economy recovers from a recession and when an economy grows quickly.
As an example, in 2005, a year in which real GDP grew very rapidly,interest rates on 3 -month Treasury
bills rose from 2.3 percent at the beginning of the year to 3.9 percent by the end of the year.
-According to this Application, one reason why interest rates rise during an economic recovery is

• A)the demand for money increases, while the supply of money remains fixed.
• B)the demand for money decreases, while the supply of money increases.
• C)the demand for money remains fixed, while the supply of money increases.
• D)the demand for money increases, while the supply of money increases.

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Definitions:

Panic of 1837

A financial crisis in the United States that led to a major recession lasting until the mid-1840s, triggered by a speculative fever and failure of banks.

Alexis de Tocqueville

A French political thinker and historian best known for his works "Democracy in America," examining the democratic revolution that he believed had been occurring over the previous several hundred years.

American Freedom

The ideal of liberty and rights that defines the ethos and foundational principles of the United States.

Panic of 1837

A financial crisis in the United States triggered by a speculative fever, leading to bank failures and a deep economic depression.