An Increase in the U.S.interest Rate

question 10

Multiple Choice

An increase in the U.S.interest rate

• A)raises the opportunity cost of holding dollars.
• B)induces households to increase consumption.
• C)shifts money demand to the right.
• D)leads to a depreciation of the U.S.dollar.

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Definitions:

Federal Reserve System

The central banking system of the United States, responsible for monetary policy.

Issuing Federal Reserve Notes

The process by which the Federal Reserve, the central banking system of the United States, distributes its official currency.

Money Market Mutual Funds

Investment funds that pool money from investors to purchase short-term, high-quality debt securities as a way to offer returns with minimal risk.

Bank Deposit Rates

The interest rate paid by banks to depositors for keeping their money in savings accounts, fixed deposits, or other types of deposit accounts.