During periods when the inflation rate is positive, how does the real interest rate compare to the nominal interest rate?
What will be an ideal response?
The real interest rate equals the nominal interest rate minus the inflation rate or, by rearranging, the nominal interest rate equals the real interest rate plus the inflation rate. This latter specification shows that when the inflation rate is positive, the nominal interest rate is greater than the real interest rate.
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From September 2013 to September 2014, the employment-to-population ratio increased from 58.6 percent to 59.0 percent. This change could have been the result of
A) a decrease in the working-age population. B) unemployed workers becoming part-time workers. C) unemployed workers becoming discouraged workers. D) discouraged workers starting to look for jobs again.
What is meant by a preference reversal?
What will be an ideal response?
Everything else held constant, in the market for reserves, when the federal funds rate equals the interest rate paid on excess reserves, raising the interest rate paid on excess reserves
A) increases the federal funds rate. B) lowers the federal funds rate. C) has no effect on the federal funds rate. D) has an indeterminate effect of the federal funds rate.
According to real business cycle theory, an increase in financial frictions might lead to ________, if ________
A) a decrease in output; the rise in the credit spread causes a leftward shift of aggregate demand B) a decrease in inflation; the disruption of capital markets results in a leftward shift of long-run aggregate supply C) a decrease in output; the disruption of capital markets results in a leftward shift of long-run aggregate supply D) a decrease in output; a decline in expected output causes a leftward shift of aggregate demand