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The amount of money that the public wants to hold is $10 billion. With a monetary base of $2 billion and a money multiplier of 4, which of the following will most likely occur?A The monetary base will increase.B The nominal interest rate will increase.C The money multiplier will increase.D The money demand curve will shift right.E Spending will increase.

Answer :

The answer is B. The nominal interest rate will increase. The nominal interest rate is the stated interest rate.

The nominal interest rate is the rate that is publicized by banks, obligation guarantors, and venture companies for credits and different speculations. It is the expressed loan fee paid or acquired to the moneylender or by financial backer. Thus, if as a borrower, you get a credit of $100 at a pace of 6%, you can hope to pay $6 in interest. The rate has been increased to assess expansion.

Nominal Interest Rate = Real Interest Rate + Projected Rate of Inflation

Short-term nominal interest rates are set by national banks. These rates are the reason for other financing costs that are charged by banks and different foundations on, e.g., advances to customers and Mastercard adjusts. Central banks might choose to keep ostensible rates at low levels to spike financial action.

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