An Increase in the Interest Rate

question 30

Multiple Choice

An increase in the interest rate:

• A)makes consumption in period two relatively more expensive compared to consumption in period one.
• B)does not change relative cost of consuming in either period.
• C)makes consumption in period two relatively cheaper compared consumption in period one.
• D)discourages savings in each period.

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Definitions:

Financial Intermediaries

Institutions that facilitate the channeling of funds between lenders and borrowers by becoming intermediaries themselves.

Pension Funds

Investment pools that collect and manage funds for the purpose of providing retirement income to employees.

Standard of Value

A benchmark or reference point used to measure the worth of goods, services, or assets in economic transactions.

Standard of Value

A recognized measure that is used to set the price or value of goods, services, or assets in economic transactions.