When Interest Rates Increase with All Else Remaining the Same,which

question 2

Multiple Choice

When interest rates increase with all else remaining the same,which of the following is true?

• A) Both calls and puts increase in value
• B) Both calls and puts decrease in value
• C) Calls increase in value while puts decrease in value
• D) Puts increase in value while calls decrease in value

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Definitions:

Government Spending

The total amount of money spent by the government on various services and projects, including education, defense, infrastructure, and welfare programs.

Crowding-Out Effect

Describes a situation in economics where increased public sector spending reduces or eliminates private sector spending, often due to higher interest rates or borrowed funds.

Private Saving

The portion of individual or household income that is not spent on consumption but saved for future use.

Private Investment

The expenditure by businesses on capital goods, such as machinery and buildings, and changes in inventories.