How did changes in world interest rates contribute to the explosion of debt in the 1970s? What happened in the early 1980s to reverse this?
What will be an ideal response?
Rising inflation in the 1970s led to falling real interest rates, spurring borrowing by many developing-country governments. Higher nominal rates and lower inflation in the early 1980s reversed the situation, making continued borrowing more expensive.
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If the Fed aims to achieve a level of unemployment below its natural rate, it must follow time-inconsistent policies
a. True b. False Indicate whether the statement is true or false
A person will choose to work another hour if the benefit of another hour of work is:
A. greater than the opportunity cost. B. exactly equal to the average total cost to the firm. C. exactly equal to the opportunity cost. D. less than the opportunity cost.
Other things the same, a higher real interest rate raises the quantity of
a. domestic investment. b. net capital outflow. c. loanable funds demanded. d. loanable funds supplied.
At equilibrium, if quantity supplied is 16, quantity demanded
A. is less than 16. B. is 16. C. is more than 16. D. cannot be found without more information.