When the expected rate of inflation is added to the real interest rate, the result is called the:
A. preferred rate.
B. nominal interest rate.
C. adjustment rate.
D. differential rate.
Answer: B
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Starting from long-run equilibrium, a large tax cut will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; higher B. expansionary; higher; potential C. recessionary; higher; potential D. recessionary; lower; lower
Why do trade-offs occur? How are budget constraints related to trade-offs?
What will be an ideal response?
Which of the following is a possible result of adverse selection?
a. Only lemons remain in the market for used cars. b. A store manager shirks his responsibility because his supervisor is not present at all times. c. A car mechanic does not bother to properly fix the customers' cars when his work cannot be monitored. d. Many people selling their houses at very low prices expecting prices to decline further.
The most volatile part of wealth is
A. transfer payments. B. Bonds. C. the stockmarket. D. savings accounts.