An Increase in Expected Real Interest Rates Would Probably Cause

question 19

Multiple Choice

An increase in expected real interest rates would probably cause desired national saving to rise because

• A)less must be saved to reach a given saving target.
• B)the increased return makes saving more attractive.
• C)the government would respond by increasing expenditures.
• D)current interest rates would fall in response to higher expected real interest rates in the future.

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Definitions:

No Interest

This term describes financial agreements or products that do not accrue interest.

Postpone

To delay an event or action to a later time.

Per Annum

Annually or per year, often used in the context of interest rates or salaries.

Term Deposit

A type of bank deposit that has a fixed term and typically offers a higher interest rate than savings accounts.