EconomicsInterest Rates
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Economic Concepts and Interest Rates Quiz

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#1

What is the definition of interest rate?

The rate at which commercial banks lend money to individuals or businesses
Explanation

Rate at which banks lend money.

#2

Which of the following is not a tool used by central banks to influence interest rates?

Fiscal policy
Explanation

Not a central bank tool.

#3

What is the term for the interest rate set by the Federal Reserve to lend money to other banks?

Federal funds rate
Explanation

Rate set by Fed.

#4

Which of the following factors does NOT typically influence interest rates?

Government fiscal policy
Explanation

Not typically influential.

#5

What is the term for the interest rate charged by banks to their most creditworthy customers?

Prime rate
Explanation

Rate for top customers.

#6

Which of the following is NOT a component of the nominal interest rate?

Real interest rate
Explanation

Not a component of nominal rate.

#7

What is the Fisher effect in economics?

The relationship between nominal interest rates, real interest rates, and inflation
Explanation

Nominal rates, real rates, inflation.

#8

What is the term for the interest rate that banks charge each other for overnight loans?

Federal funds rate
Explanation

Overnight loan rate.

#9

What does the term 'yield curve' refer to in finance?

A graph showing the relationship between bond maturity and yield
Explanation

Maturity-yield graph.

#10

What is the term for a situation where short-term interest rates are higher than long-term rates?

Inverted yield curve
Explanation

Short-term rates > long-term rates.

#11

What is the term for the practice of buying a financial asset with borrowed money?

Leverage
Explanation

Buying with borrowed funds.

#12

What is the term for the interest rate adjusted for inflation?

Real interest rate
Explanation

Rate adjusted for inflation.

#13

Which of the following accurately describes the relationship between interest rates and bond prices?

Inverse relationship
Explanation

Opposite relationship.

#14

Which of the following is NOT a potential effect of an increase in interest rates?

Increase in bond prices
Explanation

Not an effect of rate increase.

#15

What is the term for a central bank's buying and selling of government securities in the open market to control the money supply?

Monetary policy
Explanation

Buying/selling securities.

#16

Which of the following is a characteristic of negative interest rates?

Encourages saving over spending
Explanation

Promotes saving.

#17

Which of the following is NOT a tool commonly used by central banks to implement monetary policy?

Fiscal policy
Explanation

Not a central bank tool.

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