What Effect Will an Increase in the Interest Rate Have

question 7

Multiple Choice

What effect will an increase in the interest rate have on investment?  

• A) An increase in the interest rate will lead to an increase in investment, because holding stocks and bonds will be more profitable. 
• B) An increase in the interest rate will lead to an increase in investment, because people will be less willing to hold money. 
• C) An increase in the interest rate will lead to a decrease investment only if firms have to borrow money to make investments. 
• D) An increase in the interest rate will lead to a decrease investment regardless of whether firms have to borrow money to make an investment.

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Definitions:

Stimulus-Response Psychology

A branch of psychology focusing on how organisms respond to stimuli in their environment.

Reflexology

An alternative medicine practice involving the application of pressure to specific points on the feet, hands, or ears, with the belief that this will have a beneficial effect on other parts of the body and improve general health.

Structuralism

Structuralism is an approach in psychology that seeks to understand the structure of the mind by breaking down mental processes into their simplest components.

Behaviorism

A branch of psychology that focuses on observable behaviors and disregards the mental processes.