One Role of the Interest Rate Is to

question 201

Multiple Choice

One role of the interest rate is to

• A) allocate capital to its most efficient uses.
• B) redistribute income from the wealthy to the poor.
• C) reduce the rate of inflation by encouraging government borrowing.
• D) discourage saving and encourage current consumption.

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Definitions:

Diving Board

A flexible board secured at one end and projecting over water, used for diving or jumping into a pool.

Pluralistic Ignorance

A psychological phenomenon where the majority of group members privately reject a norm, but assume incorrectly that most others accept it, leading to a disconnect between beliefs and behaviors.

Diffusion of Responsibility

A socio-psychological phenomenon where individuals in a group are less likely to take action or feel a sense of responsibility in the presence of others.

Aggression

Any behavior intended to harm another person who is motivated to avoid the harm