If Interest Rates in General Fall,​

question 10

Multiple Choice

If interest rates in general fall,​

• A) ​the prices of existing bonds rise
• B) ​the prices of existing bonds fall
• C) ​the prices of existing bonds are unaffected
• D) ​the coupon rate adjusts for the change in interest rates

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Definitions:

Inflation Rate

The percentage change in the price level of goods and services in an economy over a given period of time.

Prime Interest Rate

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

Equation of Exchange

An economic formula representing the relationship between the supply of money in an economy and the level of prices of goods and services, expressed as M*V = P*T.

Nominal GDP

The gross domestic product measured in current prices, without adjustment for inflation.