Explain why high nominal interest rates in an economy does not necessarily mean real interest rates in the same economy are also high
What will be an ideal response?
Real interest rates have been adjusted for inflation and are calculated as nominal interest rates minus the inflation rate. The higher the inflation rate, the lower the real rate of interest, so high nominal interest rates do not always mean high real interest rates. For example, if the nominal interest rate is 12 percent, and the inflation rate is 9 percent, the real interest rate is only 3 percent.
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If there is a decrease in the price of the final good that an industry produces, the labor demand curve in the industry is likely to:
A) shift to the left. B) shift to the right. C) become vertical. D) become horizontal.
A sudden decrease in consumers' wealth-resulting, for example, from a stock market crash-would initially cause a(n)
a. downward movement along the consumption function. b. downward shift of the consumption function. c. upward movement along the consumption function. d. upward shift of the consumption function.