Higher Interest Rates Lower the Real Quantity of Money Demanded

question 22

Multiple Choice

Higher interest rates lower the real quantity of money demanded

• A)by making alternative nonmonetary assets look relatively more attractive to wealth holders.
• B)by causing an increase in the issuance of corporate debt.
• C)by changing the distribution of wealth toward the poor who have a lower demand for money.
• D)by increasing government interest payments,which in turn increase taxes,lowering disposable income.

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Definitions:

Total Interest

The amount of interest payable over the life of a loan or financial instrument, calculated as the sum of all interest payments.

Principal

The amount borrowed or invested.

Accrued Interest

Interest that has been incurred but not yet paid, reflecting money owed on loans or credit extended.

Dishonored Note

A dishonored note is a promissory note that has not been paid upon its maturity date.