If a Central Bank Increases Interest Rates,then Gradually

question 29

Multiple Choice

If a central bank increases interest rates,then gradually:

• A) the country's gross domestic product is likely to increase.
• B) foreign exchange rate is likely to come under downward pressure.
• C) demand for imported goods and services is likely to decrease.
• D) flows of investment funds into the country are likely to decrease.

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Definitions:

Cash Payback Period

The duration it takes for the earnings from an investment to cover the initial amount invested.

Annual Net Cash Flows

The total amount of money, including inflows minus outflows, that a business generates over one year.

Expected Total Cash Flows

The projection of all the cash that is anticipated to be received or paid out over a certain period of time in the future.

Cash Payback Period

The time period required for the returns from an investment to repay the initial capital outlay.