When the Fed Increases the Federal Funds Rate

question 39

Multiple Choice

When the Fed increases the federal funds rate,

• A)there is no effect on investment because investment depends on the real interest rate.
• B)the real interest rate falls,and investment increases.
• C)the real interest rate rises,and investment decreases.
• D)the real interest rate is unaffected,but investment still decreases.
• E)the real interest rate rises,and investment does not change.

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Definitions:

Negative

Referring to a less than zero value, indicating a deficit, loss, or detrimental condition in various contexts such as economic indicators or mathematical values.

Infrequently Used Bridge

An infrequently used bridge is a bridge structure that sees low usage or traffic, often due to its location or the availability of alternative routes.

Willingness to Pay

The maximum amount an individual is prepared to spend on a good or service, indicating the value they place on it.

Profit

The financial gain achieved when the amount earned from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.