Other Things the Same, an Increase in the Interest Rate

question 60

Multiple Choice

Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded

• A)rise, and investment spending rise.
• B)rise, and investment spending fall.
• C)fall, and investment spending rise.
• D)fall, and investment spending fall.

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Definitions:

Zero-Sum Game

A situation in which one participant's gain or loss is exactly balanced by the losses or gains of the other participants.

Fixed Rate

An interest rate that remains constant over the specified term of a loan or financial instrument, regardless of market fluctuations.

Variable Rate

An interest rate that can change, in contrast to a fixed interest rate, and is often associated with loans or savings accounts.

Prime Rate

The interest rate that commercial banks charge their most creditworthy customers, often used as a benchmark in lending rates.