Higher Interest Rates Tend to

question 211

Multiple Choice

Higher interest rates tend to

• A) reduce the total planned spending on goods and services.
• B) lower the costs of building new plants and equipment.
• C) increase the quantity demanded of goods and services.
• D) make it less costly for people to buy houses and cars.

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Definitions:

Basis

Basis refers to the difference between the spot price of a commodity and the futures price of the same commodity, which can indicate market expectations of future price movements.

Profit

The financial gain realized when the revenue generated from business activities exceeds the expenses, taxes, and costs.

Convergence

The movement of the price of a futures contract towards the spot price of the underlying asset as the delivery date approaches.

Futures Contracts

Legal agreements to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future.