Suppose That Over the Past Year,the Real Interest Rate Was

question 110

Multiple Choice

Suppose that over the past year,the real interest rate was 6 percent and the inflation rate was 4 percent.It follows that

• A)the dollar value of savings increased at 6 percent,and the purchasing power of savings increased at 2 percent.
• B)the dollar value of savings increased at 6 percent,and the purchasing power of savings increased at 10 percent.
• C)the dollar value of savings increased at 10 percent,and the purchasing power of savings increased at 2 percent.
• D)the dollar value of savings increased at 10 percent,and the purchasing power of savings increased at 6 percent.

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Definitions:

Utility Function

A function that captures the level of satisfaction or happiness that consumers derive from consuming various combinations of goods and services.

Initial Allocation

The initial distribution of goods, resources, or entitlements among individuals or groups before any trade or market exchange occurs.

Contract Curve

In economics, it is a curve that shows the set of mutually beneficial (efficient) allocations in a trade or exchange situation.

Edgeworth Box

A diagram used in microeconomics to show the distribution of resources and the optimal allocation between two individuals.