Credit card A offers an introductory APR of 7.6% for the first 3 months and a standard APR of 23.4% thereafter, while credit car
d B offers an introductory APR of 7.9% for the first 3 months and a standard APR of 22.9% thereafter. All else being equal, which of these statements is correct? (Assume all interest is compounded monthly.) A. Credit card B is the better deal over the course of the first 3 months and over the course of the first year.
B. Credit card B is the better deal over the course of the first 3 months, but credit card A is the better deal over the course of the first year.
C. Credit card A is the better deal over the course of the first 3 months and over the course of the first year.
D. Credit card A is the better deal over the course of the first 3 months, but credit card B is the better deal over the course of the first year.
The Correct Answer is Credit card A is the better deal over the course of the first 3 months, but credit card B is the better deal over the course of the first year.
D. Credit card A is the better deal over the course of the first 3 months, but credit card B is the better deal over the course of the first year.
Explanation
An Introductory rate is low rate given by credit card companies to its clients as an incentive for card application. An introductory APR with a 0% offer simply means that a person is not required to pay interest on his or her purchase for a particular period of time. Introductory APR could last from 6 to 12 months. For the first 3 month, card A (7.6%) offers a better deal than card B(7.9%). Over the course of the year, card B(22.9%) offers a better deal than card A(23.4%)
The aggregate demand curve is downward sloping. It implies price levels are falling and the quantity of output will increase as well as the domestic income. The theories that can explain why the aggregate demand curve is downward sloping: the Pigou's wealth effect, the Keynes's interest-rate effect, and the and Mundell-Fleming's exchange-rate effect.
