Distinguish between real rate of interest and nominal rate of interest.
What will be an ideal response?
The real rate of interest is the percentage increase in purchasing power that the borrower pays to the lender for the privilege of borrowing. It indicates the increased ability to purchase goods and services that the lender earns.The nominal rate of interest is the percentage by which the money the borrower pays back exceeds the money that was borrowed, making no adjustment for any decline in the purchasing power of this money that results from inflation.
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Critics of stabilization policy argue that
a. policy affects aggregate demand quickly, but the effects on aggregate demand are long-lived. b. policy affects aggregate demand with a lag, and the effects on aggregate demand are long-lived. c. policy affects aggregate demand with a lag, but the effects are short-lived. d. policy does not affect aggregate demand.
Federal tax dollars can be spent only if
A. Congress passes a law and overrides a veto. B. Congress passes a law that the President signs. C. Congress passes a law that the President signs and overrides a veto. D. Congress passes a law and fails to override the veto.
Refer to the above table. You have a choice among four alternatives. Choice A lets you invest $250,000 at 4 percent; B lets you invest $125,000 at 6 percent; C lets you invest $62,500 at 8 percent, and D lets you invest $31,250 at 10 percent. Which choice will get you to $1 million faster?
A. A B. B C. C D. D
If consumption increases by $9 when disposable income increases by $10, the marginal propensity to consume (mpc) equals:
A. 0.1. B. 1.0. C. 9.0. D. 0.9.