If you agree to a long-term loan at a specified nominal rate of interest and inflation turns out to be higher than was anticipated,
A) the nominal rate of interest falls.
B) the nominal rate of interest rises.
C) the real rate of interest falls.
D) the real rate of interest rises.
C
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For a natural monopoly, if price is equal to marginal social cost, then
A) the deadweight loss is as large as possible. B) the firm makes zero economic profit. C) there is no deadweight loss. D) there is no deadweight loss and the firm makes a positive economic profit.
If an excise tax is placed on a product that has a perfectly inelastic demand, then: a. the entire tax will be paid by the consumer
b. the entire tax will be paid by the producer. c. the consumer and producer will each pay a share of the tax. d. the incidence of the tax cannot be determined unless we know the coefficient of price elasticity of supply. e. the tax is progressive.
The XYZ Corporation can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the:
A. investment will be profitable. B. investment will be unprofitable. C. real rate of interest is 4 percent. D. real rate of interest is 2 percent.
The substitution effect of an inferior good is positive.
a. true b. false