An Increase in the Real Interest Rate Will

question 191

Multiple Choice

An increase in the real interest rate will

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

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Definitions:

Coupon

The annual interest rate paid on a bond, expressed as a percentage of the face value or the periodic interest payment made by bond issuers to its bondholders.

Market Rate

The prevailing rate of interest or return available on investments, often referred to in the context of loans or savings.

Capital Loss

The loss incurred when the selling price of an asset is less than the purchase price, reflecting a decrease in the value of the asset.

Put Bond

A type of bond that allows the holder to force the issuer to buy back the bond at specified times before maturity.