Author Question: The difference between nominal and real interest rates is that A) nominal interest rates are ... (Read 67 times)

Yi-Chen · **on:** Jun 30, 2018

The difference between nominal and real interest rates is that

A) nominal interest rates are measured in terms of a country's output, while real interest rates are measured in monetary terms.
B) nominal interest rates are measured in monetary terms, while real interest rates are measured in terms of a country's output.
C) nominal interest rates can fluctuate, while real interest rates always remain fixed.
D) real interest rates can fluctuate, while nominal interest rates always remain fixed.
E) real interest rates are the same in every country, while nominal interest rates are different for every country.

Question 2

Ricardian equivalence argues that when the government

A) increases taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
B) cuts taxes and decreases its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
C) cuts taxes and raises its surplus, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
D) cuts taxes and raises its deficit, consumers anticipate that they will face lower taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.
E) cuts taxes and raises its deficit, consumers anticipate that they will face higher taxes later to pay for the resulting government debt, thus people will raise their own private saving to offset the fall in government saving.