a. why would households be interested only in real value of consumption, income, and bonds? how households would feel if nominal values of consumption, income, and assets all doubled, and the price level P, also doubled.
b. distinguish between household's initial asset position and the change in that position. If a household hold a negative saving, is that household necessarily a borrower in the sense of having a negative position bonds?
c. How does an increase in the rental price, R/P, affect the quantity of capital services demanded, K^d? where does the assumption of diminishing marginal product of capital (MPK) come in?