Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 12 percent:
A. neither the borrower nor the lender benefits from inflation.
B. both the borrower and the lender lose from inflation.
C. the borrower benefits from inflation, while the lender loses from inflation.
D. the lender benefits from inflation, while the borrower loses from inflation.
Answer: C
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In the mid-1830s, the U.S. entered an inflationary period that culminated in the depression of 1839-1843 . Contemporary economic historians attribute this economic downturn to
a. the demise of the Second Bank of the U.S. in 1832. b. over-issue of gold coins by the U.S. Mint. c. over-expansion by the manufacturing sector. d. external forces, including large inflows of specie from Mexico and Europe.
A government policy that charges coal producers a fee per ton of coal produced (an "effluent charge"), where the fee is determined by the amount of pollutants discharged into the air or water, will lead to a(n):
a. decrease in the market equilibrium quantity of coal produced. b. decrease in the market equilibrium price of coal. c. increase in the market equilibrium price of coal. d. a and c are correct.
U.S. residents bear the burden of unemployment equally
a. True b. False
What happened that was unusual during the 1980s?
a. Debt soared due to a war. b. Debt soared during a time of peace. c. Debt plummeted due to a recession. d. Debt plummeted due to tax increases.