In 2005-2006, the Fed Increased Interest Rates in an Attempt

question 125

Multiple Choice

In 2005-2006, the Fed increased interest rates in an attempt to halt inflation.What was the most likely effect of raising interest rates on velocity?

• A)Velocity will decrease.
• B)Velocity will increase.
• C)Velocity will remain constant.
• D)Velocity is unrelated to saving accounts.

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Definitions:

Selling Price

The amount of money a buyer pays to purchase a product or service.

Revaluation Model

An accounting method that allows for the upward adjustment in the carrying amount of a fixed asset to reflect its current market value.

Exchange Rate

The price at which one currency can be exchanged for another currency in the foreign exchange market.