The nominal rate of interest is 4% and the anticipated rate of inflation is 5%. What is the real rate of interest?
A) 1%
B) -1%
C) 4%
D) 9%
B
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Elasticity rises as price falls along a linear, downward-sloping demand curve
a. True b. False
A bank may hold secondary reserves, such as U.S. government securities because:
a. they pay higher interest rates than deposits at the Fed, and are easily converted into cash assets. b. they pay higher interest rates than deposits at the Fed, even though they are hard to convert assets. c. they pay lower interest rates than deposits at the Fed, but are more easily converted into cash assets. d. they pay lower interest rates than deposits at the Fed, and are hard to convert into cash assets.
Which of the following conditions is most essential if a firm is going to earn long-run economic profits?
a. an inelastic market demand for the product b. a small number of firms, even though competitors are free to enter the industry c. a differentiated product d. restrictions that limit the entry of potential competitors into the industry
Since Britain withdrew from the ERM in 1992, what has it done with regard to fixing its exchange rates?
A) Britain has joined with the euro, forgoing its long-standing independence. B) Britain has put the pound back on solid footing by backing it with gold. C) Britain has retained its independent pound currency and not joined the currency union of Europe. D) Britain has abandoned its own monetary authority for the certainty of fixed exchange rates with its largest trading partners.