________ Nominal Interest Rates Do ________ Indicate That the Cost

question 36

Multiple Choice

________ nominal interest rates do ________ indicate that the cost of borrowing is ________.

• A) Low; not necessarily; low
• B) High; necessarily; high
• C) Low; necessarily; low
• D) Both B and C

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Definitions:

Federal Funds Rate

The interest rate at which depository institutions lend reserve balances to other depository institutions overnight, on an uncollateralized basis.

Short-Term Loans

Loans that are scheduled to be repaid in less than a year.

Reserves

Funds or commodities set aside for future use or to meet unforeseen contingencies, often related to banks or natural resources.

Money Creation

The process by which the money supply of a country, or of an economic or monetary region, is increased.