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If the Money Supply Increases,the Interest Rate Will __________ and People

question 30

Multiple Choice

If the money supply increases,the interest rate will __________ and people will want to hold a __________ quantity of money.


Definitions:

Real Risk-free Rate

The theoretical return on an investment with no risk of financial loss, adjusted for inflation.

Inflation Premium

The additional interest that investors require to compensate for the decrease in purchasing power of money due to inflation over time.

Zero Coupon Bonds

Bonds that do not pay interest during their lifetime and are sold at a discount to their face value.

Coupon Payment

A periodic interest payment made to bondholders during the life of the bond.

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