Consider someone who borrows $10,000 to buy a car at a fixed interest rate of 9%. If inflation is 3% at the time the loan is made, what is the real interest rate at which the loan must be repaid, and to what level would the interest rate have to rise for the real interest rate on the loan to be zero?

The problem of asymmetric information that brings about a general decline in product quality in an industry is

A. the lemons problem. B. a market failure. C. the result of government regulation. D. creative response.

Describe how the real interest rate changes in a Keynesian model if a shock shifts the IS curve down and to the right and the Fed changes its policy to keep output unchanged.

What will be an ideal response?