The real wealth effect explains that higher prices
a. make people worse off by reducing the value of their wealth, leading them to save more and spend less
b. make people worse off by reducing the value of their wealth, leading them to save less and spend more
c. make people better off by increasing the value of their wealth, leading them to save less and spend more
d. increase borrowing, leading to higher interest rates and less investment
e. make domestic goods relatively more expensive, increasing the demand for domestic goods and decreasing the demand for foreign goods
A
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Interest is considered a(n)
A) explicit cost when the firm pays a bank to borrow money. B) implicit cost when the firm owner uses his or her own funds to buy capital. C) return to entrepreneurship if the firm owner uses her own funds to buy capital. D) form of depreciation if the cost of borrowing increases. E) Both answers A and B are true.
With a surplus in our balance of payments, there is an excess __________ dollars in the foreign exchange market, causing the dollar to __________
A) demand for; appreciate B) demand for; depreciate C) supply of; appreciate D) supply of; depreciate
Which of the following countries fell victim to contagion during the Asian financial crisis?
A. Indonesia, Malaysia, and the Philippines B. Malaysia, South Korea, and Taiwan C. Malaysia, the Philippines, and Taiwan D. All of these countries were hurt during the crisis.
A rise in the price level that reduces the real wealth of people who hold financial assets is an illustration of the:
a. interest rate effect. b. monetary theory. c. supply-side theory. d. wealth effect. e. trade effect