In the 1970s, savings and loan associations primarily earned their income from extending fixed-rate home loans. They extended many of these loans in the early 1970s when inflation was low. Were the savings and loans winners or losers as inflation skyrocketed in the late 1970s?
The savings and loan associations were big losers. Those who lend at fixed interest rates lose when there is unanticipated inflation. The S&Ls extended loans at relatively low nominal interest rates compared to what was charged for loans in the late 1970s. The S&L loans were repaid in dollars that had far less purchasing power than at the time the loans were extended.
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Refer to Figure 29-2. Consider the market for U.S. Dollars against the British pound shown in the graph above. From this graph we can conclude that the dollar price of a British pound has ________ to ________ dollars per pound
A) decreased; 2.00 B) decreased; 0.46 C) increased; 0.50 D) increased; 2.17
Which of the following factors leads to differences in income across individuals?
a. the level of skills possessed by an individual b. the quality of human capital and education c. preferences for work over leisure d. all of the above
When does money creation occur?
a. Banks hold required reserves. b. Individuals hold checkable deposits. c. Banks make loans with their excess reserves. d. Individuals take out loans.
What would a leftward shift of the labor demand curve indicate?
a. Firms want to hire more workers than before at any given wage than before. b. Firms want to pay a higher wage than before at any given level of employment. c. Households want to supply fewer hours of work than before at any given wage rate. d. Firms want to hire fewer workers than before at any given wage rate. e. Households want to supply more hours of work than before at any given wage rate.