For inflation to have no real effect on the economy, leaving all decisions and their real outcomes unchanged, five conditions must be met. Which of the following incorrectly states one of those conditions?
A) Inflation is universally and accurately anticipated.
B) All savings and money earn the nominal interest rate.
C) Inflation of p0 percent lowers the nominal interest rate by p0 below the no-inflation nominal rate.
D) Only real interest income is taxable and only the real cost of borrowing is tax-deductible.
E) Inflation raises the prices of all goods by the same percentage.
C
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Indicate whether the statement is true or false
A point to the left of the BP curve would represent
A) a balance of payments deficit. B) a balance of payments surplus. C) internal disequilibrium. D) Both A and C.
If the interest rate goes up, what happens to the investment demand curve?
A) It shifts to the right. B) It shift to the left. C) It stays put. D) We cannot tell.
All the following are examples of variable costs, except
a. Labor costs b. Cost of raw materials c. Accounting fees d. Electricity costs