The Interest Rate Is the Price Borrowers Pay to Borrow

question 277

Multiple Choice

The interest rate is the price borrowers pay to borrow money.Key interest rates are controlled by the Federal Reserve System.If the Federal Reserve acts to reduce interest rates, economists would expect the quantity of money demanded to

• A)increase.
• B)decrease.
• C)not change.
• D)not change, although the demand schedule itself will shift outward.

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Definitions:

Elastic in the Long Run

Describes a situation where the quantity demanded or supplied of a good or service responds significantly to price changes over a longer period.

Telephone Service

A communication service provided through electrical transmission of voice, fax, or other information.

Medical Care

Professional services provided by doctors, nurses, dentists, and other health professionals to treat or prevent health problems and enhance well-being.

Perfectly Elastic

A situation in economics where the quantity demanded or supplied changes infinitely in response to any change in price, typically represented with a horizontal demand or supply curve.