Inflation affects borrowers and lenders differently. After signing a contract with a fixed nominal interest rate, it can be expected that
a. borrowers will hope that prices fall.
b. lenders will hope that prices rise.
c. lenders will hope that the purchasing power of money will fall.
d. borrowers will hope that prices rise.
d
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We are investigating the relationship among three variables. We have graphed two of them. Suppose that the variable that is not measured on the x-axis or the y-axis changes. Then, there is
A) no impact on the plotted curve because the variable is not measured on either of the axes. B) a violation of the absence of trend assumption. C) a shift in the plotted curve. D) a movement along the plotted curve. E) an omitted variable.
Refer to above figure. In the absence of trade, how many Widgets does this country consume?
What will be an ideal response?
Why does the Fed have imperfect control over the money supply over short periods?
a. Because of unpredictable changes in reserve requirements b. Because the public responds to open market operations in unpredictable fashions c. Because the Fed does not know how much reserves will change when it buys or sells securities d. Because of unpredictable changes in public desire to hold cash and banks' desires to hold reserves
Assume you have $1,000 in a savings account at the beginning of the year and the price level is equal to 100. If the price level is equal to 115 at the end of the year, the real value of your savings is closest to
A. $1,115. B. $885. C. $1,150. D. $870.