If the bank advertises 6 percent annual interest rate on a one-year certificate of deposit and you anticipate the rate of inflation to rise to 3 percent during the year, then the real rate of interest on the certificate of deposit is
A. 9 percent.
B. 3 percent.
C. 2 percent.
D. 6 percent.
Answer: B
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The supply of loanable funds is from
A) firms and the government if it has a budget deficit. B) households and the government if it has a budget deficit. C) firms and the government if it has a budget surplus. D) households and the government if it has a budget surplus. E) households and firms.
Assume that people experience a one-time 50 unit increase in their consumption (i.e. the intercept of the consumption function increases by 50). In this case
a. equilibrium income will rise by 50 units times the investment multiplier. b. equilibrium income will rise by 50 units. c. equilibrium income will rise by 50 units times the tax multiplier. d. equilibrium income will not change because this increase is temporary.
If price is equal to short-run average variable cost, the firm is at the point known as:
a. the break even point. b. the profit maximizing point. c. the shutdown point. d. the revenue maximizing point.
Which of the following features does a free-trade area necessarily have?
A. Absence of trade barriers among the member nations B. Harmonization of all economic policies C. Free movement of factors of production across the member nations D. Equal tariff rates