Which Statement Describes the Interest-Rate Effect

question 121

Multiple Choice

Which statement describes the interest-rate effect?

• A) A higher price level leads to higher money demand, higher money demand leads to higher interest rates, and a higher interest rate increases the quantity of goods and services demanded.
• B) A higher price level leads to higher money demand, higher money demand leads to lower interest rates, and a higher interest rate reduces the quantity of goods and services demanded.
• C) A lower price level leads to lower money demand, lower money demand leads to higher interest rates, and a lower interest rate reduces the quantity of goods and services demanded.
• D) A lower price level leads to lower money demand, lower money demand leads to lower interest rates, and a lower interest rate increases the quantity of goods and services demanded.

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Definitions:

Unrealized Gains

Unrealized gains are increases in the value of an investment or asset that has not been sold, thus not yet turning the gain into cash.

Significant Influence

The power to participate in the financial and operating policy decisions of an investee but not control those policies, typically through ownership of a substantial share of voting stock.

IFRS

International Financial Reporting Standards, which are accounting standards issued by the International Accounting Standards Board (IASB) for financial reporting globally.

Equity Method

An accounting technique used in consolidating the financial statements of entities in which an investment has been made and significant influence is held.