Let: (1) Pt Be the Price of One Unit of a Market

question 19

Multiple Choice

Let: (1) Pt be the price of one unit of a market basket of goods (i.e., a composite commodity) in year t; (2) P e be the expected price of one unit of a market basket of goods in year t + 1; (3) u e be the
Expected rate of inflation between period t and t + 1; and (4) it be the one- year nominal interest rate. Suppose an individual borrows the equivalent of one unit of a composite commodity today. Given this information, which of the following expressions represents (i.e., is equal to) the amount of the composite commodity one must repay in one year?

• A) [(1 + u e )/(1 + it)]- 1.
• B) [(1 + it) P e /Pt]- 1.
• C) [(1 + u e )/(1 + it)]+1.
• D) (1 + u e )/(1 + it).
• E) (1 + it)Pt/ P e .

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Definitions:

Fredric Jameson

Fredric Jameson is an American literary critic and theorist, known for his analysis of contemporary cultural trends and the influence of capitalism on art and society.

Karl Marx

A 19th-century philosopher, economist, and revolutionary socialist whose works have influenced social theory and the development of the social sciences.

Capitalism

is an economic system characterized by private or corporate ownership of capital goods, by investments determined by private decision, and by prices, production, and the distribution of goods that are determined mainly in a free market.

Alienation

A state or experience of being isolated, detached, or disconnected from oneself, others, or society, often used in social sciences to describe a sense of estrangement produced by social structures.