Answer to Question #194853 in Economics for Nonhlanhla

Question

Fact A: when the price of bonds, a certain type of financial instrument, increases, the interest rate on the bond decreases.

Fact B: when the repo rate, an interest rate determined by the South African Reserve Bank, increases, the prime rate on loans charged by banks also increases.

Based on the two facts mentioned above, which of the following statements are true?

a. Fact A will be illustrated by a curve with a positive slope.

b. Fact A will be illustrated by a curve with a negative slope.

c. Fact B will be illustrated by a curve with a positive slope.

d. Fact B will be illustrated by a curve with a negative slope.

Answer 1

b)c)