The Reason That Velocity Increases When Interest Rates Rise Is

question 129

Multiple Choice

The reason that velocity increases when interest rates rise is

• A)the Fed encourages banks to turn money in faster for recycling, which causes money to move faster.
• B)the opportunity cost of saving increases, so people hold smaller cash balances.
• C)home mortgage payments increase, so people write larger checks that reduces their checking account balances.
• D)the opportunity cost of holding money increases, so average money balances decrease.

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Definitions:

Illustrating Charisma

Demonstrating the compelling attractiveness or charm that can inspire devotion in others.

Recency Errors

A cognitive bias that occurs when the most recent information or experiences have a disproportionate impact on one's memory or evaluation of a situation.

The Halo Effect

A cognitive bias where an observer's overall impression of a person, company, brand, or product influences their feelings and thoughts about that entity's character or properties.

Leniency Errors

A bias in assessment or judgment processes where the evaluator tends to consistently rate others more favorably than warranted.