If People Expect Nominal Interest Rates to Be Higher in the Future,the

question 79

Multiple Choice

If people expect nominal interest rates to be higher in the future,the expected return to bonds ________,and the demand for money ________.

• A)rises;increases
• B)rises;decreases
• C)falls;increases
• D)falls;decreases

---

Definitions:

Real Wage

The purchasing power of wages, adjusted for inflation, reflecting the actual goods and services that can be bought.

Inflation Rate

The measure of inflation through the rising cost of goods and services, which diminishes the power of currency.

Nominal Wage

The wage earned by an employee, expressed in current currency terms, without adjustment for inflation or changes in purchasing power.

Efficiency Wage

A wage set above the market equilibrium by employers in an effort to enhance productivity, attract higher quality employees, and reduce turnover.