If the nominal interest rate is 6.3 percent and the inflation rate is 7.2 percent, then the real interest rate equals:
a. - 13.5 percent.
b. + 13.5 percent.
c. - 0.9 percent.
d. -7.2 percent.
e. + 1.1 percent.
c
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In the real loanable funds market, the vertical and horizontal axes, respectively, are:
a. Nominal interest rate and nominal loanable funds. b. Real interest rate and real loanable funds. c. Real, risk-free interest rate and real loanable funds per time period. d. Real, risk-free interest rate and real loanable funds. e. None of the above.
Implementing a regional free-trade agreement may have an effect in which, due to reduced tariffs, a nation in the agreement begins to import a product it had previously produced itself. This effect is called:
a. trade creation. b. trade diversion. c. reciprocal trade agreements. d. the employment effect of FTAs.
A tariff is a tax restriction on imported goods.
a. true b. false
When the government taxes income as part of a redistribution program,
a. the poor pay higher taxes. b. the rich always benefit more than the poor. c. the poor are encouraged to work. d. incentives to earn income are diminished.