Classify Each of the Following in Terms of Their Effect

question 36

Multiple Choice

Classify each of the following in terms of their effect on interest rates (increase or decrease) :
I. Perceived risk of financial securities increases.
II. Near term spending needs decrease.
III. Future profitability of real investments increases.

• A)I increases,II increases,III increases
• B)I increases,II decreases,III decreases
• C)I decreases,II increases,III increases
• D)I decreases,II decreases,III decreases
• E)None of the options

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Definitions:

Socially Optimal

A situation in which resources are allocated in the most efficient way from the society's point of view, maximizing total welfare.

Pollution

The contamination of the natural environment by harmful substances or energies, which can affect air, water, and land negatively and pose risks to human health and ecosystems.

Marginal Benefit

The boost in utility or enjoyment derived from the additional consumption of a unit of a good or service.

Government Intervention

Actions taken by a government to affect the economy in various ways, such as through regulations, taxes, subsidies, or direct provision of goods and services.