When the Expected Real Rate of Interest Declines, Ceteris Paribus

question 69

Multiple Choice

When the expected real rate of interest declines, ceteris paribus, we expect:

• A) more investment projects will be undertaken.
• B) lenders will need to lower their average default rate to maintain their profit margins.
• C) firms will borrow less and cut back on their investment projects.
• D) individuals will steer clear of equity markets.

---

Definitions:

Prefabricated Homes

Houses that are manufactured off-site in advance, usually in standard sections that can be easily shipped and assembled.

William Levitt

An American real estate developer known for popularizing the modern American suburb through the mass production of affordable housing.

Family Farms

Agricultural enterprises that are owned and operated by families, often passed down through generations, focusing on the production of crops and livestock.

Civil War

A conflict occurring within a single country or state, frequently sparked by differences in politics, society, or the economy.