Based on the real interest rate, who tends to benefit from unanticipated inflation in terms of borrowing and lending?
What will be an ideal response?
The real interest rate is the nominal interest rate minus the anticipated inflation rate. During periods of unanticipated inflation, borrowers tend to benefit and lenders tend to lose. If the nominal interest rate is fixed, the real interest rate tends to become very low or even negative as inflation increases. Borrowers enjoy paying the low real interest rate, but lenders do not enjoy earning it.
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Steel production creates pollution. If a tax is imposed on steel production equal to the marginal external cost of the pollution it creates, ______
A. steel producers will cut pollution to zero B. the deadweight loss created by steel producers will be cut to zero C. the market price of steel will rise by the amount of the tax D. steel producers will continue to produce the inefficient quantity of steel
If the CPI in 2004 is 200, and in 2005 the CPI is 180, the rate of inflation from 2004 to 2005 is
A) 20%. B) 10%. C) 0%. D) -10%.
Compare the MPCs in Canada and the U.S. If it is 0.50 in Canada and 0.90 in the U.S., then
a. the income multiplier is smaller in the U.S. and the same change in aggregate expenditure in Canada and the U.S. creates a larger change in national income in theU.S. than it does in Canada b. the income multiplier is larger in the U.S. and the same change in aggregate expenditure in Canada and the U.S. creates a larger change in national income in theU.S. than it does in Canada c. the income multiplier is larger in the U.S. and the same change in aggregate expenditure in Canada and the U.S. creates a smaller change in national income inthe U.S. than it does in Canada d. the income multiplier is smaller in the U.S. and the same change in aggregate expenditure in Canada and the U.S. creates a smaller change in national income inthe U.S. than it does in Canada e. the income multiplier is larger in the U.S. but the same change in aggregate expenditure in Canada and the U.S. creates the same change in national income inthe U.S. as it does in Canada
For a particular good, a 5 percent increase in price causes a 2 percent decrease in quantity demanded. Which of the following statements is most likely applicable to this good?
a. There are many close substitutes for this good. b. The good is a luxury. c. The market for the good is broadly defined. d. The relevant time horizon is long.