The Fed Announces That It Intends to Implement Policies to Increase

question 8

Multiple Choice

The Fed announces that it intends to implement policies to increase interest rates. Which of the following correctly identifies the most likely result of higher U.S. interest rates?

• A) More money will flow into the United States from foreign investors.
• B) The economy will experience an increase in business investment spending.
• C) The value of the dollar will fall relative to other currencies.
• D) The rate of inflation will increase.

---

Definitions:

IRA Contribution

Money placed into an individual retirement account (IRA) that may qualify for tax deductions or other tax advantages.

AGI

Adjusted Gross Income; a determinant of tax liability calculated by adjusting gross income for certain allowable deductions.

Qualified Pension Plan

A retirement plan that meets the requirements set by the Internal Revenue Code, thereby offering tax benefits such as tax-deferred growth on earnings and deductible contributions for the employer.

Employer Contributions

Payments made by an employer towards employees' benefits, including retirement plans, health insurance, and other perks.