Define the nominal interest rate and the real interest rate. Discuss the relationship between the nominal interest rate and the real interest rate
What will be an ideal response?
The nominal interest rate is the percentage return on a loan expressed in dollars. The real interest rate is the percentage return on a loan expressed in purchasing power. In other words, the nominal interest rate is the number of dollars received in interest for a loan and the real interest rate is the goods and services the interest can buy. The real interest rate equals the nominal interest rate minus the inflation rate.
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An increase in the interest rate should ________ the demand for dollars and the value of the dollar, and net exports should ________
A) increase; increase B) increase; decrease C) decrease; decrease D) increase; not change E) decrease; increase
The conduct of monetary policy is the responsibility of:
a. commercial banks. b. the U.S. Treasury. c. the Federal Reserve System. d. the Congress and the president.
Government policies that help increase the skills of the workforce or that subsidize employment more directly would
a. decrease employment and increase output b. increase employment and decrease output c. increase employment and increase output d. increase unemployment and decrease output e. increase unemployment and increase output
Which of the following shows the relationship between national income (GDP) and total spending?
a. Demand schedule b. Consumption curve c. Expenditure schedule d. Balance schedule