An Increase in the Real Interest Rate Will Increase the

question 103

Multiple Choice

An increase in the real interest rate will increase the

• A) current market value of assets yielding income in the future.
• B) size of the inflationary premium.
• C) cost of current consumption goods relative to future consumption.
• D) net present value of $100 to be received one year from now.

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Definitions:

Moral Hazard

A situation where one party engages in risky behavior or fails to act in good faith because another party bears the consequences of that behavior, often seen in insurance and financial sectors.

Incentives

Incentives or disincentives that encourage people or organizations to behave in specific manners.

Insurance Premiums

The amounts paid for insurance coverage, typically charged monthly or annually, to maintain the insurance policy.

High Deductible

A high deductible refers to the larger initial amount paid by an insured person before insurance coverage for healthcare costs begins, often leading to lower premium costs.