Figure 26-4

question 192

Multiple Choice

Figure 26-4.On the horizontal axis of the graph,L represents the quantity of loanable funds in billions of dollars.
-Refer to Figure 26-4.If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent,then the equilibrium real interest rate is

• A)lower than 6 percent.
• B)6 percent.
• C)between 6 percent and 8 percent.
• D)higher than 8 percent.

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Definitions:

Fixed-Wage Contract

An employment agreement where the salary does not change regardless of economic conditions or performance levels.

Inflation

The quickness at which the comprehensive level of goods and services' prices rises, corroding purchasing ability.

Real Income

The earning power of a person's money, considering the effects of inflation on purchasing power.

Wages

Payment to resource owners for their labor.