Per capita GDP will definitely fall if
A. The rate of economic growth is less than the rate of population growth.
B. There is a decrease in the size of the working population.
C. The population falls.
D. The rate of economic growth falls.
Answer: A
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If the realized real interest rate in an economy is 6%, the nominal interest rate is 8%, and the expected inflation rate is 8%, then the realized inflation rate in the economy is:
A) 2%. B) 4%. C) 8%. D) 6%.
The figure above shows the cost, demand, and marginal revenue curves for a monopoly. The firm
A) will make an economic profit of $20. B) will charge a price of $10 per unit. C) will produce 20 units per day. D) is a natural monopoly.
Capital inflows occur if foreign interest rates are greater than domestic interest rates
Indicate whether the statement is true or false
Loretta agrees to lend Ted $500,000 to buy computers for his consulting firm. They agree to a nominal interest rate of 8%. Both expect the inflation rate to be 2%
(a) Calculate the expected real interest rate. (b) If inflation turns out to be 3% over the life of the loan, what is the real interest rate? Who gains from unexpectedly high inflation, Loretta or Ted? (c) If inflation turns out to be 1% over the life of the loan, what is the real interest rate? Who gains from unexpectedly low inflation, Loretta or Ted?