During the last tax year you lent money at a nominal rate of 6 percent. Actual inflation was 1.5 percent, but people had been expecting 1 percent . This difference between actual and expected inflation
a. transferred wealth from the borrower to you and caused your after-tax real interest rate to be 0.5 percentage points higher than what you had expected.
b. transferred wealth from the borrower to you and caused your after-tax real interest rate to be more than 0.5 percentage points higher than what you had expected.
c. transferred wealth from you to the borrower and caused your after-tax real interest rate to be 0.5 percentage points lower than what you had expected.
d. transferred wealth from you to the borrower and caused your after-tax real interest rate to be more than 0.5 percentage points lower than what you had expected.
c
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Starting from long-run equilibrium, a decrease in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. higher; potential D. lower; higher
Changes in ________ that are intended to achieve macroeconomic policy objectives refer to fiscal policy
A) exchange rates B) interest rates C) government taxes and purchases D) the money supply
Which of the following determines how much money an individual will decide to hold?
a. Investment spending b. Income taxes c. The price level d. The supply of money e. Real GDP
If we look at the equation for money demand from Irving Fisher, which of the following statements is true?
A. Money demand is not a factor of nominal income B. The price level does not impact money demand C. There isn't an explicit role for the interest rate in the equation D. Velocity does not play any role in the equation