Figure 34-1 -Refer to Figure 34-1.If the Current Interest Rate Is 2

question 127

Multiple Choice

Figure 34-1
-Refer to Figure 34-1.If the current interest rate is 2 percent,

• A)there is an excess supply of money.
• B)people will sell more bonds,which drives interest rates up.
• C)as the money market moves to equilibrium,people will buy more goods.
• D)All of the above are correct.

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Definitions:

Nominal Rate

The interest rate stated on a bond or loan before adjusting for inflation or other factors.

Lump Sum

A one-time payment executed at a specific moment, rather than several installments spread out over a period.

Nominal Rate

The advertised or stated interest rate on a loan or investment, not taking into account the effect of compounding or inflation.

Monthly Compounding

The process where interest earned is added to the principal sum every month, so that from that moment on, the interest that has been added also earns interest.