A Decrease in the Real Interest Rate Will

question 276

Multiple Choice

A decrease in the real interest rate will

• A)cause consumers to spend less and save more.
• B)most likely increase consumer's purchases of durable goods.
• C)most likely increase the reward to savings.
• D)most likely increase the cost of borrowing.

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Definitions:

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain it.

Marginal Efficiency

The additional benefit received from consuming or producing one more unit of a good or service.

Capital

Refers to any financial asset, including cash, equipment, and buildings, used in production of goods or services.

Investment Project

A project undertaken by a company or an individual in expectation of generating future financial returns.