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7 Cards in this Set
- Front
- Back
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interest rate
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the rental price of money usually expressed as an annual percentage of the nominal amount of money borrowed; the price of borrowing money for the use of its purchasing power
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allocative function
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the function of interest rates in the ecnomy whereby they allocate funds between surplus spending units (SSUs) and deficit spending units (DSCUs) in the financial market
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return on investment
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the future additional real output generated by investment in productive capital projects
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positive time preference
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the preference of people to consume goods today rather than tomorrow
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real rate of interest
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the nominal rate of interest prevailing in the marketplace adjusted for the expected rate of inflation; the equilibrium rate of interest if no inflation occurs
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fisher equation
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the inflation premium component of the nominal rate of interest; it equals the difference between the nominal rate of interest and expected inflation
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nominal interest rate
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the interest rates that are observed in the marketplace
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