How does deflation affect those with debt?
What will be an ideal response?
A decline in the price level means that the fixed payments of loans and bonds are made with dollars of greater purchasing power, increasing the burden on borrowers.
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According to the interest-rate-based transmission mechanism for monetary policy, a decrease in the money supply will cause the
A) interest rate to fall, causing planned real investment spending to rise and leading to an increase in aggregate demand. B) interest rate to fall, causing planned real investment spending to rise and leading to a decrease in aggregate demand. C) interest rate to rise, causing planned real investment spending to fall and leading to a decrease in aggregate demand. D) interest rate to rise, causing planned real investment spending to rise and leading to a decrease in aggregate demand.
Distinguish between a perfectly competitive firm and a monopolistically competitive firm on the basis of the long-run equilibrium price
What will be an ideal response?
Briefly explain what economists mean when they refer to the stock market as a random walk.
What will be an ideal response?
Investment spending in the United States tends to be unstable because:
A. expected profits are highly variable. B. capital goods are durable. C. innovation occurs at an irregular pace. D. all of these contribute to the instability.