Government austerity measures are more likely to resolve a sovereign debt crisis if ________
A) the real interest rate falls along with inflation
B) the fiscal multipliers are especially large
C) no aid is available from other countries, so the government is not tempted to abandon the austerity plan
D) citizens, also, adopt austerity
A
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One advantage of a consumption tax is that there are fewer problems with inflation.
A. True B. False C. Uncertain
What role do well-functioning financial markets play in a market economy?
What will be an ideal response?
If both prices increase by 10 percent and money income remains constant, the budget line for both goods in question will:
a. become steeper b. become flatter c. will have the same slope d. will become vertical.
Suppose the nominal yield during the next two years was expected to remain at 10%, but the yield on a one-year security was 10% and on a two-year security was 12%. Investors would:
a. Borrow for one year, invest for two years, and at the end of the first year, roll over the loan. b. Probably do nothing, because markets are efficient, which means there is no way to arbitrage them. c. Borrow for two years, invest for one year, and then roll over the investment at the end of the first year. d. Borrow for two years and invest for two years, but at the end of the first year, re-borrow and re-invest at the market rate. e. Borrow for one year and invest for one year, but at the end of the first year, re-borrow and re-invest the borrowed funds at the expected rate.