If the Nominal Interest Increases, Then

question 109

Multiple Choice

If the nominal interest increases, then:

• A) the money supply increases.
• B) the money supply decreases.
• C) the demand for money increases.
• D) the demand for money decreases.

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Definitions:

Inflation

The rate at which the general level of prices for goods and services is rising, eroding purchasing power.

Benefit

An advantage or profit gained from something.

Foregone Benefit

The lost potential gain from other alternatives when one alternative is chosen.

Alternative Cost

Also known as opportunity cost, it represents the benefit that is missed or given up when choosing one alternative over another.