Because an Increase in the Nominal Interest Rate Raises the Opportunity

question 131

Multiple Choice

Because an increase in the nominal interest rate raises the opportunity costs of holding money, the money demand curve:

• A)shifts to the right.
• B)shifts to the left.
• C)slopes upward.
• D)slopes downward.

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Definitions:

Investee

An entity in which an investor holds an interest, often evidenced by ownership of shares or securities.

Short-term Investments

Assets that are expected to be converted into cash, sold, or consumed within one year or one business cycle, whichever is longer.

Long-term Investments

Assets that a company intends to hold for more than one fiscal year, such as stocks, bonds, or real estate, with the expectation of generating long-term benefits.

Accrued Interest

Interest that has been earned but not yet paid or received in cash.