In an economy with no inflation, explain why interest rates are positive
What will be an ideal response?
Because most people prefer consumption today relative to consumption tomorrow, they must be compensated for delaying consumption. Interest is the compensation for the delay in consumption.
You might also like to view...
Over the last 50 years, has the ratio of household production to gross domestic product in the United States increased or decreased? Consider the effect of the increased number of women working outside the home, and the effect of advances in
technology in household production such as microwaves, coffee makers, power tools, etc.
Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16. Assume the minimum that Matt would be willing to accept to drive to campus is equal to the $4 he saved on the concert ticket. What would his economic surplus be if he bought his textbooks at the university bookstore rather than online?
A. $50 B. $20 C. $5 D. $1
To counteract steep declines in the birth rate, some countries have offered stipends to pregnant women and subsidies for parents who have a second child. These financial supports are examples of ______.
a. factor payments b. opportunity costs c. positive incentives d. human capital
Refer to the graph showing the demand for books. A movement from point E to point D is caused by:
A. an increase in the price of books from $12.00 to $16.00. B. a decrease in the price of books from $16.00 to $12.00. C. an increase in the price of movies. D. an increase in consumer income.