In the Classical Model with Fixed Income, If the Interest

question 76

Multiple Choice

In the classical model with fixed income, if the interest rate is too high, then investment is too ______ and the demand for output ______ the supply.

• A) high; exceeds
• B) high; falls short of
• C) low; exceeds
• D) low; falls short of

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Definitions:

Equivalent Interest

An interest rate or yield that makes two financial instruments with different payment structures equally valuable.

Nearest 0.01%

A method of rounding numbers to the closest hundredth of a percent.

Coffee Fund

Informally refers to a pool of money collected for buying coffee or sometimes used as a casual fund for small group expenses.

Allocated

Distributed or assigned for a specific purpose or to a particular person.