Explain the relationship between interest rates and (1) investments in housing, and (2) business investments
As the interest cost of a home mortgage is the major component of the total cost of owning a house, fewer families will want to purchase new homes as interest rates rise. Thus, higher interest rates will reduce expenditures on housing.
Business investment is also sensitive to interest rates. Because the rate of interest that must be paid on borrowings is part of the cost of an investment, business executives will find investment prospects less attractive as interest rates rise. Therefore, they will spend less.
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The PIH predicts that temporary tax cuts would
A) be spent on consumer nondurables and services. B) be offset by an increase in the saving ratio. C) be offset by a decrease in the saving ratio. D) be treated the same as permanent tax cuts.
Relatively high interest rates in the United States contributes to a strong U.S. dollar (less dollars per another currency) and this may lead to a deficit on the U.S. current account
Indicate whether the statement is true or false
In symbolic terms where Y equals real GDP, POP equals total population, and N equals the number of employed workers, Y/POP must equal:
A. N/Y × POP/N. B. Y/POP × N/POP C. N/Y × N/POP D. Y/N × N/POP.
The economy of the United States can best be described as pure capitalism.
Answer the following statement true (T) or false (F)