The inflationary premium is that portion of the interest rate that reflects
a. the real return derived by lenders.
b. the rush to buy goods before prices rise.
c. the expected annual rate of decline in the purchasing power of money while a loan is outstanding.
d. the price that one must pay for earlier availability of goods and services during a period of price stability.
C
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If the MPC in an economy is 0.8, government could close a recessionary expenditure gap of $100 billion by cutting taxes by
A. $100 billion. B. $125 billion. C. $80 billion. D. $200 billion.
The present value of receiving $200 one year from now when the prevailing rate of interest is 8 percent is
a. $192 b. $185.19 c. $200 d. $208 e. $160
GDP per person tells us the income and expenditure of the
a. richest person in the economy. b. poorest person in the economy. c. average person in the economy. d. entire economy.
Ingrid operates a business that provides optics equipment to the government. She just received a government contract for $2 million. She then hires three new employees and buys a great quantity of supplies from several vendors. Her employees and the vendors earn more money, pay more taxes, spend more money, and save more money. This is an example of ______.
a. automatic stabilization b. the Laffer curve c. the multiplier effect d. contractionary policy