One explanation for the negative slope of the aggregate demand curve is the "wealth effect" (aka the "real‑balances" effect). what is this effect? as inflation occurs, the purchasing power of consumers increases as accumulated wealth increases in value. for normal goods, people buy more of a product if their income increases. as inflation occurs, consumers buy fewer goods and services because the value of their accumulated wealth declines. interest rates increase when prices rise as consumers try to borrow larger amounts of money to maintain their consumption. the higher interest rate discourages spending. according to the wealth effect, what happens as the price level falls? consumption and investment spending increase. consumption spending increases. consumption spending decreases and investment spending increases. consumption spending decreases. consumption and investment spending decrease. consumption spending increases and investment spending decreases.

Suppose that jim plans to borrow money for an education at texas a& m university. jim will need to borrow $25,000 at the end of each year for the next five years (total=$125,000). jim wishes his parents could pay for his education but they can’t. at least, he qualifies for government loans with a reduced interest rate while he is in school. he has a special arrangement with aggiebank to lend him the money at a subsidized rate of 1% over five years without having to make a payment until the end of the fifth year. however, at the end of the fifth year, jim agrees to pay off the loan by borrowing from longhorn bank. longhorn bank will lend him the money he needs at an annual interest rate of 6%. jim agrees to pay back the longhorn bank with 20 annual payments and the payments will be uniform (equal annual payments including principal and interest). (i) calculate how much money jim has to borrow at the end of 5 years to pay off the loan with aggiebank. a. $121,336 b. $127,525 c. $125,000 d. $102,020 e. none of the above

Any point on a country's production possibilities frontier represents a combination of two goods that an economy:

Laws corporation is considering the purchase of a machine costing $16,000. estimated cash savings from using the new machine are $4,120 per year. the machine will have no salvage value at the end of its useful life of six years and the required rate of return for laws corporation is 12%. the machine's internal rate of return is closest to (ignore income taxes) (a) 12% (b) 14% (c) 16% (d) 18%