When the Price Level Rises and Increases the Demand for Money

question 20

Multiple Choice

When the price level rises and increases the demand for money, the nominal interest rate ________ and the real interest rate ________.

• A) rises; rises
• B) falls; falls
• C) does not change; does not change
• D) falls; rises
• E) rises; falls

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Definitions:

Operating Cash Flow

The cash generated by a company’s normal business operations, indicating whether the company can maintain and grow its operations.

Sales Revenues

Income received from selling goods or services over a period of time before any costs or expenses are deducted.

Capital Cost Allowance

A form of tax depreciation that allows businesses in Canada to deduct the cost of a depreciable property over several years.

Cash Operating Costs

Expenses associated with the day-to-day operations of a business that are paid out in cash.