In 2005-2006, the Fed Increased Interest Rates in an Attempt

question 28

Multiple Choice

In 2005-2006, the Fed increased interest rates in an attempt to halt inflation.What was the most likely effect of raising interest rates on velocity?

• A)It will decrease.
• B)It will increase.
• C)It will remain constant.
• D)Velocity is unrelated to saving accounts.

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Definitions:

Accounting Rate of Return

A metric used to measure the profitability of investments, calculated by dividing the average net income by the initial investment cost.

Break-Even Time

Break-even time is the period it takes for a business or project to become financially viable, covering all its costs and starting to generate profit.

Lowest Rank

Refers to the position, level, or grade of an entity or individual that is at the bottom of a hierarchical system.

Payback Periods

The length of time required to recoup the initial investment in a project or investment, measured in years or months.