Inflation decreases the growth of capital because
i. when the after-tax real interest rate falls, savings decreases.
ii. velocity increases when inflation increases.
iii. the higher the inflation rate, the higher is the true income tax rate on income from capital.
A) i only B) ii only C) iii only D) i and iii E) i, ii, and iii
D
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A country that experiences a large deficit in the merchandise trade account should always aim at eliminating this trade deficit by adopting strict foreign trade policies
a. True b. False Indicate whether the statement is true or false
For which of the following goods is demand most sensitive to interest rate changes?
a. Refrigerators b. Shoes c. Corn d. Textbooks e. Motor oil
Economists segment the business cycle into phases and the prosperity phase of the cycle is characterized by
a. high level of real GDP, full employment, and inflation b. high level of real GDP, unemployment, and inflation c. low level of real GDP, full employment, and inflation d. high level of real GDP, full employment, and deflation e. low level of real GDP, unemployment, and deflation
If the budget deficit were reduced,
a. interest rates and investment would increase. b. interest rates would increase and investment would decrease. c. interest rates and investment would decrease. d. interest rates would decrease and investment would increase.