Question 1(Multiple Choice Worth 5 points) (04.01 LC) Which of the following would increase the opportunity cost of holding money? O Interest rates increase. O Interest rates decrease. The price level decreases. O Incomes rise. O Income taxes decrease.Question 2(Multiple Choice Worth 5 points) (04.01 LC) Which of the following assets is the most liquid? O A house during a recession O A house during an inflationary period O A demand deposit in a bank Stock in a major company O A government bondQuestion 3(Multiple Choice Worth 5 points) (04.01 MC) Which of the following accurately describes a difference between stocks and bonds? 0 Stocks are assets, while bonds are liabilities for those who own them. 0 Bonds earn variable rates of return, while stocks earn a fixed rate. Q There is an opportunity cost to stocks but not to bonds. 0 Stocks are equity, while bonds are assets that bear interest. 0 Bonds are more liquid than stocks. [E2] Question 4(Multiple Choice Worth 5 points) (04.01 MC) If the current interest rate increases, what will happen to the interest rate and price of previously issued bonds? Interest Rate; Price 0 Interest rate decrease; price decrease 0 Interest rate decrease; price increase 0 Interest rate increase; price increase 0 Interest rate increase; price decrease 0 Interest rate constant; price decrease In: [l Question 5(Multiple Choice Worth 5 points) I (04.01 MC) A given car loan is for the creditor and for the borrower. O a bond; stock 0 a bond; stock 0 liquidity; wealth O a liability; an asset 0 an asset; a liability Question 1(Multiple Choice Worth 5 points) (04.02 LC) Which of the following accurately explains the reason banks cannot advertise the real interest rate they offer for loans? 0 Such advertising would not be competitive with other lenders. 0 Federal regulations do not allow the real interest rate to be disclosed. O The actual ination rate cannot be known in advance. 0 Advertising would decrease their prots. 0 Banks never expect there to be an increase in the aggregate price level. in: Question 2(Multiple Choice Worth 5 points) (04.02 MC) If the expected rate of inflation is 3 percent and the bank charges 5 percent interest for a loan, which of the following is true? O The real interest rate is 8 percent. The nominal interest rate is 3 percent. O The real interest rate is 2 percent. O The bank will benefit if actual inflation is higher than 3 percent. The bank is not benefiting from any loan with those figures.Question 3(Multiple Choice Worth 5 points) (04.02 MC) If the inflation rate increases, which of the following accurately describes people paying fixed-interest rate loans? They will be required to pay more of the principal annually. They will pay a lower real interest rate. They will pay a higher real interest rate. They will pay a lower nominal interest rate. They will pay a higher nominal interest rate.Question 4(Multiple Choice Worth 5 points) (04.02 LC) When a bank provides a loan for a large consumer purchase, the nominal interest rate is O the real interest rate minus expected inflation O the sum of actual inflation and the real interest rate O set with no consideration of expected inflation O always less than the real interest rate the advertised rate, unadjusted for inflationQuestion 5(Multiple Choice Worth 5 points) (0402 MC) If a person buys a $100 bond with a nominal interest rate of 5 percent and the actual ination rate is 5 percent for the year, what real interest rate did they earn in that year? Q 0 percent 0 5 percent 0 10 percent 0 20 percent 0 Indeterminate [E21