Julio Borrows $250 from Ricky

question 156

Multiple Choice

Julio borrows $250 from Ricky. Ricky wants to make a 5% real return on his money, so they both agree on a 5% interest rate paid next year. Both don't anticipate the 5% inflation next year. In this case

• A) Ricky is better off.
• B) Julio will pay $15 a year from now on.
• C) Julio is better off.
• D) Ricky will receive more than 5% of real rate of return a year from now.

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Definitions:

Producer Surplus

This economic term represents the excess profit that producers make over the minimum amount they would be willing to accept for selling their goods, highlighting the benefit to sellers in a market.

Consumer Surplus

The variance between the sum consumers are ready and financially able to spend on a product or service and the sum they actually spend.

Excise Tax

A tax levied on specific goods or services, such as alcohol, tobacco, and gasoline.

Elastic Supply

A situation where the quantity supplied of a good changes significantly in response to changes in its price.