The Interest-Rate Effect

question 64

Multiple Choice

The interest-rate effect

• A)depends on the idea that increases in interest rates increase the quantity of money demanded.
• B)depends on the idea that increases in interest rates increase the quantity of money supplied.
• C)is the most important reason,in the case of the United States,for the downward slope of the aggregate-demand curve.
• D)is the least important reason,in the case of the United States,for the downward slope of the aggregate-demand curve.

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Definitions:

Cost Price

The amount of money spent to produce a good or service, excluding any markup for profit.

Reduction

The action of making something smaller or less in amount, degree, or size.

Interest Rate

The rate at which a borrower pays interest to a lender for the utilization of borrowed funds.

Mortgages

Loans specifically used to purchase real estate, in which the property itself serves as collateral against the borrowed funds.