When the Rate of Interest Falls

question 146

Multiple Choice

When the rate of interest falls,

• A)the opportunity cost of money increases, and the quantity of money demanded declines.
• B)the opportunity cost of money increases, and the quantity of money demanded increases.
• C)the demand for money is unaffected.
• D)the opportunity cost of money decreases, and the quantity of money demanded declines.
• E)the opportunity cost of money decreases, and the quantity of money demanded increases.

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Definitions:

Full Employment

A situation in which all available labor resources are being used in the most economically efficient way, typically marked by the absence of cyclical unemployment.

John Maynard Keynes

A British economist whose theories on the causes of prolonged unemployment and the role of government intervention in economies formed the basis of Keynesian economics.

Full Employment

A condition in the economy where all potential labor forces are utilized in the most economically effective manner.

Market Economy

An economic system where decisions regarding investment, production, and distribution are based on supply and demand, and prices of goods and services are determined in a free price system.