An Increase in Either the Risk-Free Rate or the Risk

question 25

True/False

An increase in either the risk-free rate or the risk premium on a fixed-rate mortgage results in a higher required rate of return when investing in the mortgage and therefore causes mortgage prices to decrease.

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Definitions:

Economic Growth

An increase in the production of goods and services in an economy over a period of time, typically measured by GDP.

Real GDP Per Person

The inflation-adjusted value of goods and services produced per individual in a country.

Real GDP Per Person

A measure of the value of all finished goods and services produced within a country in a specific time period, adjusted for inflation, divided by the total population.

Productivity

The measure of efficiency in which goods and services are produced, typically reflected by the quantity produced per unit of input.