The harrod-domar model is based on the assumption

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1. A person borrows $10,000 today at a nominal interest rate of 5%; inflation for the past 10 years has always been 2%. Today, inflation instantly rises to 7% and stays that way for the duration of the loan. Based on the above information, ceteris paribus (all else equal), today:

a. you will pay the lender back exactly $10,700.

b. the real rate of interest on your loan is 14%.

c. the real rate of interest on your loan was previously 10% and is now 35%.

d. the real rate of interest on your loan is now –2%.

e. you will pay the lender back exactly $9,500.

2. The Harrod-Domar model is based on the following assumption(s):

a. the marginal product of capital is constant.

b.the marginal product of capital is not constant.

c. saving is greater than productive investment.

d. saving is less than productive investment.

Reference no: EM131244299

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