The Interest-Rate and Real-Balances Effects Are Important Because They Help

question 70

Multiple Choice

The interest-rate and real-balances effects are important because they help explain:

• A)rightward and leftward shifts of the aggregate demand curve.
• B)why demand-management policy cannot be used effectively to curb stagflation.
• C)the shape of the aggregate demand curve.
• D)the shape of the aggregate supply curve.

---

Definitions:

Exact Simple Interest

Interest calculated on the principal amount of a loan or investment, considering the exact number of days in the interest period.

365-Day Year

A standard year length used in some financial calculations, ignoring leap years.

Exact Simple Interest

Interest calculated precisely based on the principal amount, a fixed interest rate, and the number of days between payments.

365-Day Year

A method used in finance that assumes all years have 365 days for the purpose of interest calculation.