A Decrease in the Real Interest Rate Will

question 276

Multiple Choice

A decrease in the real interest rate will

• A)cause consumers to spend less and save more.
• B)most likely increase consumer's purchases of durable goods.
• C)most likely increase the reward to savings.
• D)most likely increase the cost of borrowing.

---

Definitions:

Interest Rate

The percentage of a sum of money charged for its use, reflecting the cost of credit or the return on investment.

Rule of 70

A simple way to estimate the number of years it will take for an investment to double in size, calculated by dividing 70 by the annual rate of growth.

Interest

The cost of borrowing money, expressed as a percentage, paid by the borrower to the lender for the use of the lender's money.

Present Value

Today's value of a future monetary amount or cash flow series, calculated with a designated rate of return.