If the real interest rate is 5%, the rate of inflation in the United States is 6%, and the rate of inflation in the United Kingdom is 3%, which of the following statements would NOT be true?
A) The nominal rate of interest in the United States would be greater than the nominal interest rate in the United Kingdom.
B) The difference between the U.K. and U.S. interest rates is a function of the difference between their inflation rates.
C) The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity.
D) Investors would get a higher return on their money in the United States.
C) The nominal rate of interest in the United States and the United Kingdom would be the same because of purchasing power parity.
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A small Caribbean island-country produces only pineapples and rum. If resources are used efficiently in the economy,
A. it will not be possible to produce more rum without decreasing the production of pineapples. B. it will be possible to produce more pineapples without decreasing the production of rum. C. it will be producing on its production possibilities curve. D. it will not be possible to produce more rum without decreasing the production of pineapples AND it will be producing on its production possibilities curve.
If the MPS = 0.2, the multiplier would be
A) 0.5. B) 1. C) 2. D) 5.
The J curve implies that a real depreciation will cause
A) the nominal exchange rate to appreciate in the short run and depreciate in the long run. B) the nominal exchange rate to depreciate in the short run and appreciate in the long run. C) net exports to fall in the short run and rise in the long run. D) net exports to rise in the short run and fall in the long run.
When economists say the demand for a good is highly inelastic, they mean that
a. even if the price rose substantially, suppliers would be unwilling to offer much more of the good. b. the facilities utilized by producers of the good are inflexible; producers cannot easily expand their facilities, even in the long run. c. consumers will respond to a change in the price of the good by purchasing substantially more of it. d. a large (percentage) change in the price of a good will result in only a small (percentage) change in the quantity demanded.