During the 1990s, Japan experienced periods of deflation and very low nominal interest rates, approaching zero percent. Why would lenders of money agree to a nominal interest rate of almost zero?
What will be an ideal response?
With the deflation, the real interest rate exceeded the nominal interest rate. Lenders were making their decisions based on the higher real interest rate, not the very low nominal interest rate.
Economics
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Following a new deposit of $500, the loans of a commercial bank increase by $400. In this situation, the reserve ratio is most likely
A) 180 percent. B) 80 percent. C) 20 percent. D) 0 percent.
Economics
The supply of loanable funds is from
A) firms and the government if it has a budget deficit. B) households and the government if it has a budget deficit. C) firms and the government if it has a budget surplus. D) households and the government if it has a budget surplus. E) households and firms.
Economics