Explain the effect of a usury law
A usury law puts a ceiling on the interest rate that can be charged on loans; it may forbid charging interest entirely. To be effective, the ceiling must be below the equilibrium level of interest. Since supply of loans for capital resources is positively sloped, it intersects the downward-sloping demand curve for funds at some equilibrium interest rate. If the usury ceiling is below the equilibrium rate, the quantity of funds demanded by borrowers will be in excess of the quantity of funds lenders are willing to supply.
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Discretionary fiscal policy is a fiscal policy action, such as
A) a decrease in tax receipts, initiated by the state of the economy. B) an increase in payments to the unemployed, initiated by the state of the economy. C) an interest rate cut, initiated by an act of Congress. D) an increase in the quantity of money. E) a tax cut, initiated by an act of Congress.
Deadweight loss occurs when
A) producer surplus is greater than consumer surplus. B) the maximum level of total welfare is not achieved. C) consumer surplus is reduced. D) an inferior good is consumed.
______________ goods satisfy wants directly, whereas ___________ goods do so indirectly.
a. Capital; consumer b. Consumer; capital c. Future; capital d. Demand; supply e. Present; future
How does a "rules-based" approach to monetary policy differ from "discretionary intervention"?
What will be an ideal response?