The Price-Anticipation Effect on Interest Rates

question 6

Multiple Choice

The price-anticipation effect on interest rates:

• A) reflects the decrease in the supply of credit as a result of future expected inflation
• B) reflects the increase in the supply of credit as a result of future expected inflation
• C) reflects the decrease in the supply of credit as a result of future expected inflation rate
• D) reflects the increase in the supply of credit on inflation and future expected inflation

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price, with high elasticity indicating sensitivity.

Appropriations

Funds that are set aside by a governing body, like a legislature, for a specific use or purpose as part of a budget or spending bill.

Tuition

The fee for instruction, especially for higher education institutions.

Price-Elastic

Describes a situation where the demand for a product changes significantly in response to changes in its price.