What Is the Relationship Between Monetary Policy and Interest Rates

question 58

Multiple Choice

What is the relationship between monetary policy and interest rates?

• A)Expansionary monetary policy will always result in an increase in interest rates.
• B)Restrictive monetary policy will tend to push interest rates up,unless people expect deflation to occur,in which case interest rates will decline to low levels.
• C)Expansionary monetary policy will tend to push interest rates up,unless people expect inflation to occur,in which case interest rates will remain low.
• D)Restrictive monetary policy will always result in a decrease in interest rates.

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Definitions:

Strategic Alliance

A formal agreement between two or more parties to pursue a set of agreed-upon objectives while remaining independent organizations.

Vertical Integration

A strategy where a company expands its operations by taking over or merging with other companies that are at different stages of production or distribution in the same industry.

Merger

The combination of two or more companies into one, with the goal of increasing market share or efficiency.

Acquisition

The purchase of one organization by another.