The Redistribution Effect Refers to the Situation in Which

question 128

Multiple Choice

The redistribution effect refers to the situation in which

• A)a redistribution policy might raise consumption because poorer people spend a greater percentage of their income than the rich.
• B)rising prices might make creditors feel wealthier and encourage them to increase their spending.
• C)rising prices might make debtors feel less wealthy and encourage them to cut back on their spending.
• D)falling prices might make debtors feel less wealthy and encourage them to cut back on their spending.

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Definitions:

Effective Interest Rate

The real rate of interest earned or paid on a loan or investment, taking into account the effect of compounding interest as opposed to the nominal rate.

Mexican Pesos

The currency of Mexico, represented by the symbol $ or MXN, used for all financial transactions within the country.

Foreign Exchange Market

A global decentralized or over-the-counter market for trading currencies, determining foreign exchange rates for every currency.

Foreign Exchange Market

The global marketplace for exchanging national currencies against one another, driven by the need for currency conversion in trade and investment.