The Assumption That Current-Period Consumption Demand Is Negatively Related to the Real

question 32

Multiple Choice

The assumption that current-period consumption demand is negatively related to the real interest rate is justified as long as the

• A) income effect dominates the substitution effect.
• B) substitution effect dominates the income effect.
• C) representative consumer is a borrower.
• D) representative consumer is a lender.
• E) income effect and substitution effects are equal.

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Definitions:

Remuneration Expense

The total cost incurred by an organization for paying salaries, wages, bonuses, and other benefits to its employees.

Exercise Price

The price at which the holder of a share option or financial derivative can buy (or sell) the underlying asset or security.

Fair Value

The revenue generated from offloading an asset or the sum paid to handle a liability in an orderly market dealing at the point in time of evaluation.

Exercise Price

The exercise price is the price at which the holder of an option can buy (in the case of a call option) or sell (in the case of a put option) the underlying asset.