Which of the Following Statements Is Correct

question 42

Multiple Choice

Which of the following statements is correct?

• A) If the inflation rate is steady at 5 percent, for example, the real and nominal interest rates will be equal.
• B) An increase in the demand for goods now compared with goods in the future would cause the real interest rate to rise.
• C) A "positive rate of time preference" means that an individual would rather save than consume.
• D) During an extended inflationary period, the money (or nominal) interest rate will usually be lower than the real rate of interest.

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Definitions:

Daily Interest Rate

A method of calculating interest where the rate is applied to the principal on a daily basis.

Miller-Orr Model

A financial model used for managing cash balances and optimizing the levels of cash holding based on specified upper and lower limits.

Cash Balance Target

A cash balance target is a strategy companies use to maintain an optimal level of cash reserves for operations and unexpected expenses, aiming to balance liquidity with profitability.

Weekly Interest Rate

The interest rate applied to loans, savings, or investments calculated on a weekly basis.