All Else Being Equal in a Classical Model,a Temporary Decrease

question 32

Multiple Choice

All else being equal in a classical model,a temporary decrease in government expenditures in the United States would cause the Canadian real interest rate to ________ and the Canadian price level to ________.

• A)rise;rise
• B)rise;fall
• C)fall;rise
• D)fall;fall

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Definitions:

Time Value

The understanding that possessing money today has greater value than possessing the same amount in the future, attributed to its capacity to yield earnings.

Compound Interest Rate

The rate at which interest on a deposit or loan is calculated based on both the initial principal and the accumulated interest from previous periods.

Annuity Stream

A series of fixed payments made at regular intervals, such as monthly or annually, over a specified period or for a lifetime.

Effective Annual Rate

The actual return on an investment or the real rate of interest on a loan, taking into account the effect of compounding over a period.