Marquis borrowed $1,000 from Ayana for a year and agreed to repay her $1,050 at the end of the year. If the inflation rate was 3 percent, what is the real rate of interest Ayana received?
a. 10 percent
b. 5 percent
c. 3 percent
d. 2 percent
e. -2 percent
D
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A few years ago, the city of Seattle, Washington, considered imposing a specific tax on all espresso-based coffee drinks sold in the city. The extra tax revenue generated would have been used to fund after-school programs for low-income children
The coffee-house owners (firms) agreed that this would be a good program to fund, but they argued that the tax would sharply reduce their sales volume and they would pay most of the tax burden. This claim is true if: A) the demand for espresso-based coffee is more inelastic than supply. B) the demand for espresso-based coffee is more elastic than supply. C) there are no close substitutes for espresso-based coffee drinks. D) espresso-based coffee drinks can be produced at constant marginal cost.
Suppose the inflation rate of a country falls from 8 percent during 2002-2004 to 6 percent in 2005-2007, under the adaptive expectations hypothesis what will the expected rate of inflation at the beginning of 2008?
a. 2 percent b. 4 percent c. 6 percent d. 8 percent
If government's goal is to raise tax revenue and limit efficiency loss, taxation is most effective when:
A. supply is inelastic and demand is elastic. B. demand or supply is elastic. C. demand or supply is inelastic. D. demand is inelastic and supply is elastic.
What is most likely to happen when firms in an import-competing infant industry are offered subsidies?
A. The firms will be able to charge a price equal to the world price and still earn a profit. B. The firms will face a perfectly inelastic demand curve. C. The firms will be able to sustain only if they charge a higher price than the foreign firms. D. The firms will suffer from diseconomies of scale.