Author Question: During a deflationary period, A) the price level rises. B) the nominal interest rate does not ... (Read 37 times)

EAugust · **on:** Jun 29, 2018

During a deflationary period,

A) the price level rises.
B) the nominal interest rate does not change.
C) the nominal interest rate is less than the real interest rate.
D) the real interest rate is less than the nominal interest rate.

Question 2

Explain why choices respond to incentives and think of three incentives to which you have responded today.

What will be an ideal response?

meganlapinski · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

C

Answer to Question 2

People making rational decisions compare the marginal benefits of different actions to their marginal costs. Therefore people's choices change when their incentives, that is the marginal benefit and/or marginal cost, of the choice changes. Just as everyone else, students respond to incentives; a) A student studies because of the incentives offered by grades. b) A student is more likely to attend a class if attendance is factored into the grade. c) A student might attend a meeting of a club if the student's significant other is eager to attend the meeting.