Indicators that determine the degree of fair distribution of income are

Today we will consistently discuss the difference that is invisibly present between nominal and real interest rates.

To do this, we need to remember what inflation is and get acquainted with a new concept - consumer price index .

Along the way, let’s add a few elementary formulas to our arsenal that will allow us to quickly evaluate the real return on our investments.

So, the starting point is inflation .

The destination is a clear understanding of the difference between nominal interest rates and the inextricably linked real ones, between the nominal value of money and the real one, between nominal income and real...

What is inflation?

A loose definition of inflation is that it is the depreciation in the purchasing power of money over time.

A numerical measure of inflation is the change from year to year in the consumer price index (commonly abbreviated as CPI), which answers the question of how much the average family is forced to spend on purchasing a certain group of goods.

The reverse process of inflation, namely, an increase in the purchasing power of money due to lower prices, is called deflation .

This phenomenon was typical, for example, during the period of the Great Depression (late 1920s - early 1930s) in the United States, when the fall in prices for most services and goods per year reached 10 percent.

A rare case, it must be said, in the history of the US economy, a repetition of which has never been achieved since then...

An alternative to investing with higher returns

A good analogue of a bank deposit can be an IIS (individual investment account). In this case, the investor receives:

• 13% deduction from amounts up to 400 thousand rubles. in year.
• Opportunity to earn additional money by purchasing bonds with funds placed on IIS.

IIS is opened for at least 3 years . With this scheme, you can earn 156 thousand rubles. due to the return of previously paid personal income tax (13%) and obtain a yield of around 6-10% per annum on bonds. The risks are minimal, and earnings almost double compared to a bank deposit.

An IIS can be opened from any broker offering such a service. As an example, I’ll give BCS , you can open an account with them, immediately buy securities and after 3 years get a solid profit.

Face value of money

The essence of inflation is well understood in classical examples borrowed from the depths of economic theory.

First, let's illustrate what the nominal value of money is and what the nominal interest rate is .

Imagine yourself as an investor who placed $650 in a bank deposit or purchased a savings certificate for the same amount.

Let's assume the annual interest rate on the deposit (certificate) is 8%.

Accordingly, your reasonable expectations regarding capital increase are easy to calculate: $650 * 1.08 = $702 (+$52).

The bank, of course, will fulfill its obligations and benefit you with the promised amounts.

But what the bank definitely cannot do is guarantee that you will maintain the price level that was in effect at the time of opening the deposit (purchasing the certificate) until it is closed (redemption of the certificate).

In other words, the bank will not be able to promise you that at the end of the investment year you will become RICHER

.

This is because the bank is well aware of the insatiable appetite of mother inflation, which does not spare either depositors, bankers, the poor (which is understandable), or, less obviously, the rich.

It may happen that inflation rises above 8%, and then, despite the nominal capital gain, you will end up poorer...

The $702 we discussed above is a NOMINAL

the value of your savings.
Accordingly, 8% is the nominal interest rate .
To get to real interest rates, we will have to resort to some simple calculations presented below.

Nature of Interest Rate

If an entrepreneur borrows someone else's capital, then he must give part of the income from its use to the owner in the form of loan interest.

There are various methods for calculating loan interest, which are commonly called financial mathematics. At the same time, in the most general form, if you correlate the amount of loan capital and the fee for its use in the form of interest, you can get the interest rate:

In addition to the size of borrowed capital and the level of return on its use, the interest rate is influenced by market conditions, so the interest rate is determined on the basis of supply and demand: the interest rate increases if the demand for capital increases, and, conversely, decreases with an increase in its supply ( Fig. 29.1).

Therefore, the interest rate is the equilibrium price on the capital market.

In business practice, interest rates differ according to the terms of provision, terms of loans, degree of collateral, etc.

Figure No. 29.1. Equilibrium on the capital market D – demand for capital; S – supply of capital; E – equilibrium in the capital market.

Formula for calculating the real value of money

To calculate the real value of your money after the investment period, it is appropriate to use the following formula:

R = N / (1 + i)n , where

R

– real cash flow,
N
– nominal cash flow,
i
– inflation interest rate,
n
– number of years.

Let’s imagine that the annual increase in prices for goods and services (that is, the rate of inflation) is 5%.

With these initial data, the real value of the capital at our disposal will be $668.57:

$702 / (1 + 0.05) = $668.57

Based on the results of our investments NOMINALLY

we became richer by $52, but
REALLY
- only by $18.57.

If the term of our deposit were 10 years, then at the same rates of return on the deposit and inflation, the real income would be as follows:

N = $650 * (1 + 0.08)10 = $1403.3

R = $1403.3 /(1 + 0.05)10 = $861.5

In other words, nominally we will become richer by more than 2 times, but in reality – only by a little more than 30%...

Indicators that determine the degree of fair distribution of income are

+: decile coefficients +: Lorenz curve +: Gini coefficient

Initial signs of the onset of an economic crisis are manifested in the sphere of...

+: appeals

Overaccumulation of capital in commodity form is characteristic of crises...

+: classic

Reasons for the inflationary nature of the “emission” of bank money during the post-reform period:

+: lack of involvement of the real sector of the economy in the process of movement of bank money

+: limited movement of credit within the banking system

Indicators that can be used to characterize the economic cycle:

+: production, sales and inventories +: employment level

Suppressed inflation manifests itself in:

+: administrative price regulation +: wage freeze +: commodity shortage

A competitor enterprise curtails its activities if:

+: price below average variable costs +: loss greater than fixed costs

A policy to reduce unemployment below its natural level can:

+: cause demand inflation +: provoke adaptive inflation expectations

The long-run money supply is described by the equation...

+: Friedman M.

The policy of expensive money leads to:

+: reduction in the money supply +: increase in interest rates

The movement of the LD curve (“liquidity - money”) up or down is caused by a change in:

+: in the money market +: credit policy

The process of forming bank money:

+: causes an increase in the money supply +: associated with the money multiplier +: depends on the norm of required bank reserves

Direct taxes include:

+: corporate income tax +: income tax +: land tax

Payments to service external public debt are equal to:

+: annual repayment of foreign loans +: payment of interest payments to foreign creditors

"The Paradox of Thrift" by J.M. Keynes is what will happen:

+: fall in aggregate demand +: reduction in actual savings

Increasing the interest rate serves the following functions:

+: inhibits the use of funds for immediate consumption +: reduces the propensity to consume +: ensures income growth in the future and with the aim of increasing consumption in the future

The producer of public goods is...

+: state (enterprises, institutions, organizations)

Potential GDP is measured...

+: production volume under conditions of full employment of the population (at the level of natural unemployment)

When calculating the consumer price index, the following are taken into account:

+: consumer services +: consumer goods

Practical functions of macroeconomics...

+: formation of an optimal structure of the economy Income transferred to the United States on American capital invested in the Russian economy is included in:

+: US NNP and GNP +: US NNI and GNI

The labor intensity indicator is inversely proportional...

+: labor productivity

An indicator characterizing the cost of labor costs per 1 rub. manufactured products are...

+: labor intensity

The appropriation of profit by the land tenant is carried out on the basis of the implementation of relations:

+: orders +: use The appropriation of rent by the owner of the land is carried out on the basis of the implementation of relations ...

+: possessions The subject of macroeconomics is...

+: patterns of functioning of the national economy

The increase in costs caused by the cost of producing an additional unit of output is called...

+: marginal cost

Profit is income on:

+: real capital +: entrepreneurial resource (talent)

The concept of "normal profit" is...

+: profit that provides the entrepreneur with a normal lifestyle

An enterprise in the labor market under monopsony conditions will:

+: set a lower wage rate +: hire fewer workers in the absence of a monopoly on the product market

An enterprise's purchase of raw materials from suppliers refers to...

+: external costs The enterprise will decide to close if its loss exceeds:

+: fixed costs +: difference between total and variable costs

The increase in product caused by attracting an additional unit of resource is called...

+: marginal product An enterprise minimizes losses in conditions of pure competition if, at an optimal volume of production...

+: price above average variable cost but below average total cost

Interest is income on:

+: capital lent +: capital invested in the bank

RRRRR

The labor force is:

+: the totality of a person’s abilities for work +: object of exchange relations

The division of labor causes growth:

+: labor productivity +: production volumes

The division of labor is characterized by:

+: isolation of different types of work activity +: concentration of attention on some types of work activity and abandonment of others

The decisive prerequisites for commodity production are:

+: division of labor +: separation of property

The growth of labor productivity while keeping other conditions constant is expressed in:

+: reducing labor costs per unit of production +: increasing production output per unit of time

Market infrastructure includes...

+: commodity exchanges +: stock exchanges +: banks and credit organizations +: labor exchanges

An increase in the supply of goods (other things being equal) will cause:

+: decrease in equilibrium price and increase in sales volume +: unchanged position of the demand curve

The market is in equilibrium if:

+: demand equals supply

The equilibrium state of the consumer when combining the indifference map and the budget line is achieved at the point...

+: touching the budget line of the indifference curve

Wage growth is:

+: source of cost inflation +: source of growth in aggregate demand

Implementation of the basic principles of social policy in Russia at the beginning of the 21st century. is:

+: weakening the differentiation of incomes of the population +: mitigating social contradictions +: increasing the standard of living of the overwhelming majority of the population

The difference between the amount of interest received by the bank and the amount of interest paid by the bank is...

+: gross profit

The regressive principle of tax construction is typical for:

+: indirect taxes +: excise taxes

Equilibrium of the national economy can be achieved if:

+: aggregate supply is equal to aggregate demand +: the level of inflation in the country’s economy is stabilized +: commodity and money markets are balanced

A market economic system without state assistance cannot effectively:

+: ensure safe and sustainable economic development of the country +: solve the problem of ensuring relative social justice in society

Regulation is related to the state budget:

+: financial +: fiscal

Residents of the country are:

+: citizens of a given country +: foreigners and stateless persons living in a given country for more than a year

The amount of absolute land rent for the same area of ​​land:

+: the same with the worst, average and best +: the same with the best and average

Real salary depends on:

+: dynamics of nominal wages +: dynamics of prices for consumer goods Real wages are...

+: the amount of goods and services that can be purchased with a nominal wage

The capital market includes:

+: investment goods market +: money capital market +: securities market An increase in the interest rate will lead to...

+: growth in the supply of borrowed funds

SSSSS

Instruments of labor are all that: +: with the help of which a person acts on the object of labor +: which transfers value in parts

Specialization differs from differentiation in that it is characterized by:

+: concentration of the enterprise’s efforts on the production of a narrow range of products +: use of specialized equipment

The means of production are:

+: objects of labor and means of labor +: the entire set of material resources

The similarity between corporate and collective ownership is manifested in the fact that...

+: there is indivisibility of actually functioning capital

The cost of a unit of production with increasing labor intensity...

+: increases

A. Marshall characterizes the cost of goods on the basis of:

+: marginal utility theories

+: identifying the equilibrium price determined by marginal utility and marginal costs.

According to the methodological position of A. Smith, private interest:

+: stands above public interest

According to A. Smith, in every developed society the value of a product is determined:

+: labor costs

Demand is:

+: needs supported by the solvency of buyers

+: expression of the functional dependence of the quantity of demand on price dynamics

Cost as labor input in the social sense is very close to its content or coincides with...

+: opportunity costs

The simplest form of economic integration is...

+: Creation of free trade zones

Average productivity reaches its maximum value when...

+: its equality to marginal productivity

The double entry system (method) of international transactions is used for...

+: balance of payments compilation

Correspondence of economic concepts and reasons for the cyclical nature of economic development:

Social protection of the poor is associated with:

+: provision of free medical services to the population +: transfers in cash and in kind

Correspondence of the causes of unemployment with the views of representatives of economic schools:

Social policy includes:

+: economic assistance to the population +: social guarantees to the population from the state

Average variable costs are:

+: variable costs per unit of output +: costs obtained by dividing total variable costs by the volume of output

Demand for a company's product under conditions of perfect competition:

+: completely elastic +: completely elastic

Average total production costs are minimal in magnitude when...

+: equality of average total and marginal costs

Stagflation is characterized by:

+: decline in production and rising prices +: reduction in supply and rising prices

Stagflation occurs when:

+: an increase in the price level in a recession +: a combination of stagnation of economic activity and inflation

The amount of money that a particular subject possesses expresses:

+: nominal income +: solvency of the subject

The most liquid of all monetary aggregates is the aggregate...

+: M0

Speculative demand for money influences:

+: interest rate +: interest rate

Tax rates levied without taking into account income differentiation are considered...

+: proportional

The estimate of state revenues and expenditures for one year, adopted by the highest legislative bodies, is:

+: state budget +: federal budget

The consequence of an effective combination of neo-Keynesian and neoclassical concepts of tax policy is:

+: expansion of national production +: containment of price level growth

According to the Keynesian model, to increase aggregate demand when macroeconomic equilibrium is disrupted,...

+: injections

The reduction in the size of state property is caused by:

+: denationalization +: privatization

State social policy includes:

+: regulation of the minimum wage +: financing of science, education, culture, healthcare

Subjects of state regulation are...

+: legislative, executive, judicial, state authorities

The sum of net domestic product, depreciation and indirect taxes is:

+: gross domestic product +: final social product

Socio-economic indicators:

+: poverty level +: spending on education and science +: cost of living

Cost of products per 1 rub. fixed assets is an indicator:

+: capital productivity +: capital productivity

The structure of macroeconomics expresses...

+: ratio of material and intangible production, sectoral structure of the economy

The demand for labor depends on:

+: wage dynamics +: the value of the marginal product created by labor +: the ratio of the cost of labor and technology According to the theory of factors of production, the amount of income, appropriating them by the owners, depends on:

+: contribution of each factor to value creation +: productivity of each factor +: amount of resource involved

Demand in the capital market depends on:

+: marginal productivity of capital +: interest rate +: expected profit from the use of capital

TTTTTTT

The theory of economics is limited to the study of phenomena and processes related to: +: the development of productive forces and production relations

The technical division of labor is predetermined by:

+: the nature of the means of production used +: the types of equipment and technologies used

The theory of cooperation was developed:

+: A.V. Chayanov

The downward trend in the rate of profit, according to D. Ricardo, is caused by the following reasons:

+: flow of capital from one activity to another

The theory of marginalism is based on research:

+: maximum economic values

Consumer preference theory suggests that consumers...

+: capable of making consistent choices when consuming goods A typical production function would be...

+: have at least one constant factor in the short run

A type of scientific and technological progress in which the ratio of production factors changes...

+: non-neutral

A type of scientific and technological progress characterized by a stable relationship between the parameters of economic growth models...

+: neutral

The technological principle of connecting a worker with the means of production is characterized by:

+: technological method of production +: organizational and technical relations

Transfer payments are:

+: payments not conditional on the production of goods and services +: products and services sold free of charge

Interest concept

Interest is an important economic category that reflects the profitability of an asset or security or loan in real calculations. Any entrepreneur strives to get maximum profit from all his operations, without investing a lot of his own money. And the bet here plays almost the main role. The company exhibits an individual response to changes in interest dynamics, since the main factor is the type of activity and industry in which the subject operates.

Investors agree to invest only at the highest possible nominal rate and real interest rate. Borrowers do the opposite - they look for lenders who can give them funds at a low overpayment.

Typically, the rate finance companies pay depends on the amount and duration of the debt. The more money a bank lends to its client, the less interest it charges. If the borrower wants to repay the loan early, the organization can increase the overpayment by the remaining amount of the debt.

Interest rates and inflation

The most important characteristic of a market economy is the presence of inflation, which determines the classification of interest rates (and, naturally, the rate of return) into nominal and real. This allows you to fully assess the effectiveness of financial transactions. If the inflation rate exceeds the interest rate received by the investor on investments, the result of the corresponding operation will be negative. Of course, in terms of absolute value, his funds will increase significantly, that is, for example, he will have more money in rubles, but the purchasing power that is characteristic of them will drop significantly. This will lead to the opportunity to buy only a certain amount of goods (services) with the new amount, less than would have been possible before the start of this operation.