An Increase in the Real Interest Rate Will Cause

question 32

Multiple Choice

An increase in the real interest rate will cause

• A)the expected profit of firms to rise.
• B)the purchase price of capital to decrease.
• C)the stock prices to rise.
• D)Tobin's q to decline.

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Definitions:

External Benefit

A benefit that an action or activity provides to individuals or groups who are not directly involved in it.

Private Cost

The cost incurred by an individual or company in producing goods or services, excluding any costs imposed on others which are not reflected in market prices.

Social Value

The overall impact of an organization, policy, or project on society as a whole, beyond just the direct economic benefits.

Producer Surplus

The difference between what producers are willing to accept for a good compared to what they actually receive, essentially measuring the benefit to producers from selling at the market price.