For an imaginary economy, when the real interest rate is 5 percent, the quantity of loanable funds demanded is $1,000 and the quantity of loanable funds supplied is $1,000 . Currently, the nominal interest rate is 9 percent and the inflation rate is 2 percent. Currently,
a. the market for loanable funds is in equilibrium.
b. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will rise.
c. the quantity of loanable funds supplied exceeds the quantity of loanable funds demanded, and as a result the real interest rate will fall.
d. the quantity of loanable funds demanded exceeds the quantity of loanable funds supplied, and as a result the real interest rate will rise.
c
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What is meant by direct regulation? Give a few examples of direct regulation
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If government spending and the price level increase, then
A) the interest rate decreases, consumption increases, and investment spending increases. B) the interest rate decreases, consumption declines, and investment spending declines. C) the interest rate increases, consumption declines, and investment spending declines. D) the interest rate increases, consumption increases, and investment spending increases.
During the 1970s, the price/earnings ratio of stocks in the S&P 500 was relatively low. This low P/E ratio was
a. surprising because the inflation rate was high during the 1970s. b. not surprising because interest rates were low during the inflationary 1970s. c. not surprising because interest rates were high during the inflationary 1970s. d. surprising because the inflation rate was low during the 1970s.
Which is not true regarding a delayed-compensation contract?
A. It discourages workers from shirking. B. An effective one requires a mandatory retirement age. C. It necessarily costs more in labor costs than a time rate system. D. It is associated with an upward-sloping age-earnings profile. E. It decreases employee turnover within the firm.