Real Interest Rates Around the World Tend to

question 36

Multiple Choice

Real interest rates around the world tend to

• A) be quite different because no two countries are exactly the same.
• B) be equal after adjusting for differences in risk because financial capital seeks the highest possible return.
• C) differ because inflation rates differ across countries.
• D) be equal because trading partners would not do business otherwise.

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Definitions:

Savings Deposits

Deposits that earn interest but have no specific maturity date.

Time Deposits

Bank deposits that cannot be withdrawn before a date specified at the time of deposit without incurring penalties.

M1

A category of the money supply that includes all physical money like coins and currency, as well as demand deposits and other liquid assets held by the central bank.

Nonbanking Public

Individuals and businesses that are participants in the financial markets but do not have the authority to accept deposits or provide banking services.