The real interest rate is defined as the:
a. actual interest rate.
b. fixed-rate on consumer loans.
c. nominal interest rate minus the inflation rate.
d. expected interest rate minus the inflation rate.
c
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If the unemployment rate in the economy is steady at 4 percent per year, how does the short-run Phillips curve predict that the inflation rate will be changing, if at all? What will happen if the unemployment rate now rises to 7 percent per year?
Assume there are no changes to inflation expectations. Provide an appropriate graph to support your discussion.
A picture frame company operates in a monopolistically competitive market. Its short-run equilibrium price is $80 and its ATC is $65 . It sells 100 picture frames a week. From this we can tell:
a. this firm is making a normal profit. b. other picture frame companies will want to exit the market. c. there are no other picture frame companies in the area. d. economic profits are $1,500. e. total profits are being maximized.
Which of the following is NOT an element of the underground economy?
A. Cash-only under-the-table businesses B. Off-the-books babysitting C. Commissioned salespeople D. Illegal drug deals
Which of the following is an example of a negative externality?
A. An increase in the value of land you own when a nearby development is completed B. The costs paid by a company to build an automated factory C. Falling property values in a neighborhood where a disreputable nightclub is operating D. The higher price you pay when you buy a heavily advertised product