What Impact Would the Fed's Raising the Interest Rate Have

question 56

Multiple Choice

What impact would the Fed's raising the interest rate have on any inflationary pressure in the economy?

• A) An increase in interest rates decreases the money demand, which could slow increases in the price level.
• B) An increase in interest rates increases the money supply, which could cause the price level to increase.
• C) An increase in interest rates decreases the exchange rate, which causes net exports to rise, generating inflation.
• D) An increase in interest rates increases real GDP, which creates inflation in an economy.

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Definitions:

Racial and Ethnic Groups

Social groups that are distinguished by shared cultural practices, perspectives, and distinctions in physical characteristics.

Substance Use

The consumption of drugs or alcohol, which can range from moderate use to abuse and dependence.

Telescoping Effects

A phenomenon where women tend to progress more quickly than men from initial use of a substance to addiction, and to adverse consequences.

Physical Consequences

The bodily effects resulting from certain actions, conditions, or behaviors, which can include pain, disability, or other health complications.