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 10 percent,
A. the lender benefits from inflation, while the borrower loses from inflation.
B. the borrower benefits from inflation, while the lender loses from inflation.
C. neither the borrower nor the lender benefits from inflation.
D. both the borrower and the lender lose from inflation.
Answer: C
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A principal-agent problem occurs when hiring workers to work for a firm because
A) workers' interests are not always the same as the interests of the owners of the firm. B) workers do not respond to incentives. C) the owners of a firm are always in a position to exploit the workers. D) workers' interests are not important in the managerial decisions of the firm.
Most of the pressure for a monetary growth rule has disappeared because since 1980,
A) the relationship between movements in the money supply and movements in real GDP and the price level have become much weaker. B) the relationship between movements in the money supply and movements in real GDP and the price level have become much stronger. C) the relationship between movements in interest rates and movements in real GDP and the price level have become much weaker. D) the relationship between movements in interest rates and movements in real GDP and the price level have become much stronger.
According to Robert E. Hall and Charles Jones, successful economic performance requires
A) a favorable infrastructure of rules and institutions. B) minimizing corruption and criminality. C) the use of one of the eight major international languages. D) A and B. E) all of the above.
The proportion of domestic demand for a good that is satisfied by domestic production relative to that supplied by imports is determined by:
a. the interplay of domestic demand and supply curves and the domestic equilibrium price of the good. b. the interplay of demand and supply curves in the international market and the international equilibrium price of a good. c. domestic supply and demand curves and the international equilibrium price of a good. d. the different trade restrictions like tariffs and quotas created by the domestic government. e. the interplay of demand and supply curves in the international market and the domestic price of the good