When Prices Rise, Consumers and Businesses Hold Larger Money Balances

question 105

Multiple Choice

When prices rise, consumers and businesses hold larger money balances. This reduces the supply of loanable funds, increases the interest rate, and discourages both consumption and investment. This process is called the

• A) interest rate effect.
• B) real balance effect.
• C) investment effect.
• D) disinvestment effect.

---

Definitions:

Driving Time

The amount of time spent driving from one location to another, often considered in planning routes or estimating travel time.

Proximity

The state of being physically close or near, often used in marketing to discuss the importance of location in consumer behavior and retail strategy.

Hours of Operation

The specific times during which a business is open to customers.

Website Usability

The ease with which visitors can navigate a website and access the information they seek, greatly impacting user satisfaction and engagement.