Why is the interest rate such an important price in the economy?
What will be an ideal response?
The interest rate affects both the level and composition of investment goods production. There is an inverse relationship between the interest rate and investment. Higher interest rates will restrict investment goods production and lower interest rates will encourage investment goods production. Lower interest rates will encourage investment, and therefore enhance the short-term and long-term growth in the economy.
The interest rate also affects the composition of investment goods production by allocating capital to those projects that have the best prospects for profitability. The interest rate rations scarce money capital, and therefore physical capital, to those activities in the economy with the best rate of return or which are the most productive.
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In which of the following countries are substantial co-payments typically required as a part of the health care system?
A) Canada and the United States B) the United States and the United Kingdom C) the United States and Japan D) Japan and Canada.
In the long-run, the inflation rate will move very closely with ________
A) the growth rate of the money supply B) the change in government debt C) the growth rate of government expenditures D) changes in tax rates
International specialization and trade according to the principle of comparative advantage is mutually beneficial for all economies involved
a. True b. False Indicate whether the statement is true or false
The expression "There's no such thing as a free lunch" means
a. if one person gains, someone else must lose. b. each person must pay for exactly what he or she receives. c. when scarce resources are used to produce one good they are unavailable to produce others. d. you cannot have a free lunch at the expense of someone else.