During the 1990s, Japan experienced periods of deflation and very low nominal interest rates, approaching zero percent. Why would lenders of money agree to a nominal interest rate of almost zero?
What will be an ideal response?
With the deflation, the real interest rate exceeded the nominal interest rate. Lenders were making their decisions based on the higher real interest rate, not the very low nominal interest rate.
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Purchasing power parity means equal rates of return
Indicate whether the statement is true or false
Since World War II, the share of total income going to the bottom 20 percent of U.S. households has
A) fallen by 20 percent. B) increased by 10 percent. C) remained constant. D) more than doubled.
In a binding situation, a decrease in government spending
A. shifts the AD curve to the left. B. does not shift the AD curve. C. causes the AD curve to become horizontal. D. shifts the AD curve to the right.
A binding price ceiling:
A. will cause quantity demanded to exceed quantity supplied. B. will cause quantity supplied to exceed quantity demanded. C. will set a legal minimum price in a market. D. will increase total well-being.