An Increase in the Interest Rates Will

question 150

Multiple Choice

An increase in the interest rates will

• A)​cause people to hold less money, which, in turn, means that the velocity of money increases.
• B)​cause people to hold less money, which, in turn, means that the velocity of money decreases.
• C)​cause people to hold more money, which, in turn, means that the velocity of money increases.
• D)​cause people to hold more money, which, in turn, means that the velocity of money decreases.

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Definitions:

Nominal Interest Rate

The stated or named interest rate on a loan or investment, not accounting for inflation or compounding effects.

Compounded Monthly

Interest that is calculated and added to the account balance every month.

Periodic Interest Rate

The interest rate charged or paid over a specific period of time, often monthly, quarterly, or annually.

Conditional Sale Contracts

Agreements where the sale of goods or property is conditional upon certain terms, typically the buyer making payments over a period, with the title remaining with the seller until conditions are met.