Bill Wants to Borrow $100 from John

question 72

Multiple Choice

Bill wants to borrow $100 from John. John wants to make 6% real return on his money, so they both agree on a 6% interest rate paid next year. Neither anticipate the actual - 2% inflation rate next year. In this case:

• A) Bill will pay 6% in nominal interest rate.
• B) Bill will pay 8% in real interest rate.
• C) John is better off.
• D) all of the above

Evaluate the efficiency of competitive price-taker markets in long-run equilibrium.

Comprehend the distinction between economic profit and accounting profit in competitive markets.

Predict the impact of changes in demand and supply on market prices and the quantity produced.

Understand the conditions under which firms in a competitive market earn zero economic profit in the long run.

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Definitions:

Budget Surpluses

A situation where income or receipts exceed expenditures over a specified period of time.

Deficits

Situations in which a government's expenditures exceed its revenues during a specific period, leading to borrowing or debt accumulation.

Federal Budget Deficit

The shortfall that occurs when the federal government's expenditures exceed its revenues within a fiscal year.

National Debt

The total amount of money that a country's government has borrowed, typically from domestic or international lenders.