If the nominal interest rate is 4 percent and the real interest rate is 7 percent, then the inflation rate is
a. -3 percent.
b. 0.75 percent.
c. 3 percent.
d. 11 percent.
a
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Explain what occurs in the capital market
What will be an ideal response?
Which of the following changes would cause American net exports to decrease?
A) A decrease in the real value of the dollar B) A decrease in American income C) An increase in foreign income D) A shift in demand by American consumers away from domestically produced goods
Those who favor a passive approach to policy believe that:
a. discretionary monetary policy can be used to help the economy since monetary policy lags are short b. discretionary fiscal policy can be used to help the economy since fiscal policy lags are short. c. lags associated with implementing policies are too long and unstable for discretionary policy to be effective. d. despite the lags involved, implementing discretionary policy is preferable to inaction. e. automatic stabilizers cannot be used to help the economy since monetary policy lags are short.
An automobile manufacturer unexpectedly announces that it has hired a new chief executive officer. It is widely believed that the presence of this individual will raise the profitability of the corporation. At the same time interest rates unexpectedly rise. Which of the above would tend to make the price of the stock rise?
a. the announcement and the rise in interest rates b. the announcement but not the rise in interest rates c. the rise in interest rates, but not the announcement d. neither the announcement nor the rise in interest rates