If the Real Interest Rate Is 2 Percent and Workers

question 423

Multiple Choice

If the real interest rate is 2 percent and workers expect real wages to be 4 percent higher next year, according to real business cycle theory, workers will work

• A) less this year and more next year.
• B) more this year and more next year.
• C) less this year and less next year.
• D) more this year and less next year.

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Definitions:

Float

The time difference between writing a check and the actual withdrawal of funds from the bank account, or in securities trading, it's the number of shares available for trading by the general public.

Fair Value

An estimate of the price at which an asset or liability could be exchanged between knowledgeable, willing parties in an arm's length transaction.

Exit Price

The amount one would earn from selling an asset or the cost to transfer a liability during a well-organized sale between parties in the market.

Forced Sale

A sale carried out under conditions where the seller is under pressure to dispose of an asset, often resulting in a lower sale price than under normal circumstances.