Which of the following would be consistent with an increase in the U.S.real interest rate?
A)a Swiss bank purchases a U.S.bond instead of the German bond it had considered purchasing.
B)firms decide to do more investment spending.
C)a U.S.citizen decides to put less money in his savings account than he had planned to.
D)All of the above are consistent.

Question

Quizplus · Accepted Answer

If a Swiss bank purchases a U.S. bond instead of a German bond, this implies an increase in demand for U.S. bonds compared to German bonds, which would lead to a decrease in the yield on U.S. bonds and an increase in the price of U.S. bonds. This would result in a lower U.S. real interest rate.

Option B is not consistent with an increase in the U.S. real interest rate as an increase in investment spending would increase the demand for loanable funds, leading to an increase in the interest rate.

Option C is also not consistent with an increase in the U.S. real interest rate, as if a U.S. citizen decides to put less money in their savings account, this would decrease the supply of loanable funds and could lead to an increase in the interest rate.

Which of the Following Would Be Consistent with an Increase