When interest rates increase and normal cash holdings are decreased and invested in securities, this is called:Group of answer choicesdisintermediationdishoardingreinvestmentconsumption
Question
When interest rates increase and normal cash holdings are decreased and invested in securities, this is called:Group of answer choicesdisintermediationdishoardingreinvestmentconsumption
Solution
The term for when interest rates increase and normal cash holdings are decreased and invested in securities is called "dishoarding".
Here's a step-by-step explanation:
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Interest rates increase: This means that the cost of borrowing money goes up. It also means that the return on investments, such as securities, also goes up.
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Normal cash holdings are decreased: This means that people or institutions are holding less cash than they normally do. They might be doing this because they want to take advantage of the increased interest rates.
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Invested in securities: Instead of holding onto cash, people or institutions are buying securities. Securities are financial instruments, like stocks or bonds, that can be bought and sold.
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This process is called "dishoarding": When people or institutions reduce their cash holdings in order to invest in something else, it's called dishoarding. In this case, they're dishoarding cash in order to invest in securities.
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