What information would be important for assessing the size of the public debt beside the absolute amount of the public debt?
What will be an ideal response?
When the public debt is stated as an absolute amount, the numbers can often be staggering and misleading. The absolute amount, however, needs to be viewed in relation to the size of the economy (its GDP). If GDP is large relative to the public debt, then the nation has the capacity to service that debt. Also, as the economy grows, the debt as a percentage of GDP will tend to fall unless the economy continues to add substantially to the public debt each year with large budget deficits.
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The table above has information about the CPI, nominal wage rate, and nominal interest rate for the country of Syldavia for the years 2010 to 2012. The reference base year is 2010. The inflation rate in Syldavia from 2010 to 2011 was
A) 5.0 percent. B) -9.5 percent. C) 3.0 percent. D) 9.5 percent. E) -5.0 percent.
An assumption behind the infant-industry argument for tariff protection is that
A) foreign competitors are selling output below average cost. B) the domestic industry will be facing an upward adjustment in its average cost. C) the domestic industry will eventually gain a comparative advantage in producing the good. D) the market needs additional competition to satisfy consumer demand.
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.
Opportunity cost is
A. Measured only in dollars and cents. B. The difficulty associated with using one good in place of another. C. What is given up in order to get something else. D. The total dollar cost to society of producing the goods.