You invest an amount today for four years that pays 6% annually. The bank compounds annually. At the end of the four years you will have $150. What amount must you invest today?
A) $148.81
B) $138.81
C) $128.81
D) $118.81
D
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In the long run, an increase in the quantity of money leads to
A) a smaller percentage increase in the real interest rate. B) a smaller percentage increase in the price level. C) an equal percentage increase in the price level. D) no effect on the price level or on real GDP. E) an equal percentage increase in the real interest rate.
The classic loser from an unanticipated inflation is
A) the borrower who pays less nominal interest than expected. B) the borrower who pays more nominal interest than expected. C) the saver who earns less real interest than expected. D) the saver who earns more real interest than expected, and so should have saved more.
The value of a real option varies with all of the following, EXCEPT:
a. the range of outcomes. b. the rate of interest. c. the rate of unemployment. d. the delay in resolving uncertainty.
Starting from long run equilibrium, in response to a decrease in AD: a. The price level will increase more in the long run than in the short run
b. The short run equilibrium level of real output will be greater in the long run than in the short run. c. Neither the price level nor real output will change in the long run. d. Both a. and b. are correct