What are the two effects that explain the law of demand? Briefly explain each effect
What will be an ideal response?
The two effects that explain the law of demand are the income effect and the substitution effect. The income effect is the change in quantity demanded of a good that results from a change in purchasing power due to a change in the good's price. The substitution effect is the change in quantity demanded of a good that results from the effect of a change in the good's price making the good more or less expensive relative to other goods that are substitutes.
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What is meant by the term economic growth?
What will be an ideal response?
Katarina puts money into an account. One year later she sees that she has 6 percent more dollars and that her money will buy 4 percent more goods
a. The nominal interest rate was 10 percent and the inflation rate was 6 percent. b. The nominal interest rate was 6 percent and the inflation rate was 2 percent. c. The nominal interest rate was 4 percent and the inflation rate was 2 percent. d. The nominal interest rate was 10 percent and the inflation rate was 4 percent.