If the real interest rate is 6 percent and the price level is falling at a rate of 2 percent, what is the nominal interest rate?

Some consumer electronics products such as plasma TVs, DVD players, and digital cameras, are introduced at very high prices but over time, their prices start falling (beyond what could be attributed to falling costs as companies take advantage of

economies of scale and cheaper technologies). Which of the following is the best explanation for this observation? A) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. B) More firms are likely to enter the consumer electronics market over time, forcing market prices down. C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. D) After satisfying the demand for early adopters, firms lower price to attract the more price-sensitive consumers.

Consumption smoothing refers to

A) the tendency of all consumers to choose the same amount of current consumption. B) the tendency of consumers to seek a consumption path over time that is smoother than income. C) the tendency of consumers to seek an income path over time that is smoother than consumption. D) consumer's concerns about going heavily into debt.