the overall level of prices rises. b. all prices in the economy fall c. the pric
ID: 1132403 • Letter: T
Question
the overall level of prices rises. b. all prices in the economy fall c. the prices of some goods rise and prices of some goods fall, but more goods have price increases than decreases. all prices in the economy rise. the prices of some goods rise and prices of some goods fall, but fewer goods have price increases than decreases. d. e. 24. According to the Solow model, an economy should build a. b. c. d. e more capital as long as the extra benefit is at least as great as the extra cost. more capital as long as doing so will increase output. more capital as long as there are no diminishing returns. more capital as long as the marginal product is positive. as much capital as possible. 25. You borrow some amount of money for five years at a fixed rate of 4 percent. For the first three inflati nd for the last two years, dellation is 3 percent, Based on this intormation, your I rate of interest was larger than your nominal rate only for the last two years. 5 yrs 4 nominal rate of interest exceeded your real rate for the entire five years. e. real rate of interest exceeded your nominal rate for the entire five years. fr 3o 3 d. real rate of interest was larger than your nominal rate only for the first three years. b. beayr nominal rate of interest equaled your real rate for the entire five years. e. 26. If over a period of time real gross domestic product (GDP) decreases while nominal GDP increases, then this implies a. a significant drop in the price level. b. c. d. e. a significant rise in the price level. that real GDP is much greater than nominal GDP that the given period year occurs after the base period. that the given period occurs before the base period. Page 5 /11Explanation / Answer
Hi,
As per Chegg guidelines, we are required to answer only first question, but I will try to answer all the questions.
Ans 24. (B) because the growth rate in output can only be achieved by increasing the capital accumulation.
Ans 25. For the first 3 years, real interest = Nominal interest rate - inflation rate
r = 4%-3% = 1%
For the last 2 years,
r= 4%- (-3%) = 8%
(A) because the real interest is greater than nominal interest rate only for the last 2 years.
Ans. 26. (B) When real GDP falls and nominal gdp rises then it means the inflation or price level has increased. The real gdp ignores the price level and only takes the growth of the output.
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