Say that initially the nominal interest rate is 6% and prices are stable, but the inflation rate the following year rises to 3%. If the real rate of interest is to remain unchanged, the nominal interest rate in the second year must:
a. rise by 9 percentage points.
b. rise by 6 percentage points.
c. rise by 3 percentage points.
d. remain unchanged.
c
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Cost minimization requires that a firm equate the ratio of marginal products of inputs to the ratio of input prices.
Answer the following statement true (T) or false (F)
Economics is called an empirical science because
A) economists study real-world evidence to test their models. B) economists use assumptions in their models. C) economic models have no predictive power. D) economic analysis is only useful in a capitalistic society.
Suppose the Federal Reserve wants to decrease the money supply by $100,000 . If the required reserve ratio is 0.1, which of the following actions will achieve the Fed's goal?
a. The Fed must purchase $100,000 in bonds. b. The Fed must sell $100,000 in bonds. c. The Fed must purchase $10,000 in bonds. d. The Fed must sell $10,000 in bonds. e. The Fed must sell $90,000 in bonds.
When the U.S. dollar appreciates relative to the British pound, ceteris paribus, then ______.
a. U.S. consumers need a greater number of dollars to buy a given number of British pounds b. British consumers find that U.S. goods are less expensive in terms of their own currency c. the British pound appreciates relative to the U.S. dollar d. the relative price of British goods decreases for U.S. consumers