What is the difference between the nominal interest rate and the real interest rate?
What will be an ideal response?
The nominal interest rate is the stated interest rate on a loan, while the real interest rate is the nominal interest rate minus the inflation rate.
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If a country produces good Y (measured on the vertical axis) and good X (measured on the horizontal axis), then the absolute value of the slope of its production possibility frontier is equal to
A) the opportunity cost of good X. B) the price of good X divided by the price of good Y. C) the price of good Y divided by the price of good X. D) the opportunity cost of good Y. E) the cost of capital (assuming that good Y is capital intensive) divided by the cost of labor.
The substitution effect of a wage increase
a. probably leads most workers to want to work more. b. certainly leads all workers to want to work more. c. probably leads most workers to want to work less. d. certainly leads most firms to want to employ more workers.
Firms in a perfectly contestable market will earn higher profits than firms in markets that are not perfectly contestable.
Answer the following statement true (T) or false (F)
The government is pursuing an expansionary fiscal policy if it
a. decreases government spending and increases taxes. b. increases government spending or increases taxes. c. decreases government spending or reduces taxes. d. increases government spending and/or reduces taxes.