Asked by
Abbey Worthen
on Oct 13, 2024
Verified
The interest rate effect suggests that
A) an increase in the price level will,reduce interest rates,and therefore reduce consumption and investment spending.
B) an increase in the price level will,increase interest rates,and therefore reduce consumption and investment spending.
C) nominal interest rates do not accurately measure the yield on loans unless adjusted by use of a price index.
D) a decrease in the real interest rate will stimulate consumption and investment spending and therefore inflate the price level.
E) changes in the price level are inversely related to changes in nominal interest rates.
Interest Rate Effect
The impact that changing interest rates have on consumer spending and business investments in an economy, generally influencing economic activity.
Price Level
The mean value of prices for the full range of goods and services in the economy.
Consumption and Investment
Elements of economic activity where consumption represents spending by households on goods and services, while investment refers to spending on capital goods that will be used for future production.
- Recognize the importance of interest rates in determining consumption patterns, investment decisions, and achieving macroeconomic stability.
Verified Answer
TJ
Learning Objectives
- Recognize the importance of interest rates in determining consumption patterns, investment decisions, and achieving macroeconomic stability.