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

question 1

Multiple Choice

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

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

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Definitions:

Mantle Melting

The process where heat and pressure conditions within the Earth's mantle cause it to partially melt, producing magma.

Subduction Zone

A region of the Earth's crust where one tectonic plate moves under another, often resulting in volcanic activity, earthquakes, and the formation of mountain ranges.

Southeastern Asia

A geographic region in Asia that includes countries south of China and east of India, known for its diverse cultures, languages, and environments.

Tonga Island Arc

The Tonga Island Arc is a chain of islands in the southwestern Pacific Ocean formed from the tectonic subduction of the Pacific Plate under the Indo-Australian Plate, characterized by volcanic activity and earthquakes.