The real rate of interest is
A. the interest rate observed in the market.
B. not influenced by inflation.
C. the interest rate observed in the market minus the anticipated inflation rate.
D. a value that depends upon the stock market.
Answer: C
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Refer to Figure 11.4. Which diagram illustrates the effect of an increase in government spending?
A) A B) B C) C D) D
By holding highly liquid assets to guard against sudden large withdrawals, banks: a. sacrifice safety
b. sacrifice profitability. c. increase profitability. d. diversify their portfolio. e. earn more interest than they could on business loans.
The more flexible prices are, the
A) greater demand shifts have to be to bring about a new equilibrium. B) larger the shifts in supply will be after a change in demand. C) greater the reliance by sellers to change the nominal price. D) more quickly a shock to the economy can be absorbed.
According to estimates of the Taylor rule, monetary policy was too tight
A. in the 1990s. B. from 1960 to 1965. C. from 1965 to 1979. D. in the 1980s.