Author Question: Why are real interest rates more important than nominal interest rates with regard to analyzing the ... (Read 132 times)

Medesa · **on:** Jun 30, 2018

Why are real interest rates more important than nominal interest rates with regard to analyzing the supply and demand of loanable funds?

Question 2

The market demand curve is derived by summing individual demand curves horizontally.
a. True
b. False
Indicate whether the statement is true or false

succesfull · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

Nominal interest rates only indicate the amount of dollars that are paid or received as interest. Real interest rates indicate the amount of purchasing power paid or received as interest. Borrowers are more influenced by the purchasing power than they will sacrifice to borrow money; similarly savers are more influenced by the purchasing power they will receive for on their deposits.

Answer to Question 2

True