In the Liquidity-Preference Model, If the Nominal Interest Rate Is

question 8

Multiple Choice

In the liquidity-preference model, if the nominal interest rate is higher than the equilibrium interest rate

• A)both bond prices and nominal interest rate will eventually fall.
• B)both bond prices and nominal interest rate will eventually rise further
• C)bond prices will fall and nominal interest rate will eventually rise further
• D)bond prices will rise and nominal interest rate will eventually fall.

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Definitions:

Joint Control

A situation where the strategic financial and operating policy decisions of a business arrangement are determined by unanimous consent of the parties sharing control.

Unilateral Control

The power exerted by one entity over another without the need for mutual agreement or cooperation.

Strategic Operating Decisions

Decisions that affect the overall direction and operations of a company, focusing on long-term goals and objectives.

Line-By-Line Method

A consolidation technique where the financial statements of the parent and its subsidiaries are combined by adding together like items of assets, liabilities, equity, income, and expenses.