When the actual inflation rate turns out to be greater than the expected inflation rate, who gains — the borrower or the lender — and who loses? Explain why
What will be an ideal response?
The borrower gains because he pays back the loan in cheaper dollars — dollars that have lost more purchasing power than was expected. The lender loses because she receives dollars that have lost more purchasing power than was expected.
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If the production possibilities frontier between two goods is a straight line, then the
A) opportunity cost is not a ratio. B) resources are equally productive in both goods. C) line does not qualify as a production possibilities frontier because the unattainable production points are too close to the inefficient production points. D) Both answers A and C are correct. E) Both answers A and B are correct.
The measure of production that values output using base-year prices is called
A) underground GDP. B) nominal GDP. C) real GDP. D) value-added GDP.
Consider four possible benefits of a water resources project: I. Provides employment to construction workers currently building houses. II. Provides electric power to the market. III. Provides reduced flood risk to individuals living along the river. IV. Raises the profits of MacDonald's stands in the area that serve construction workers. Which of these are social benefits of the project?
a. All of them. b. I, II, and III, but not IV. c. I and III, but not II and IV. d. II and III, but not I and IV.
In the United States, the Federal Deposit Insurance Corporation (FDIC) collects deposit insurance premiums from banks and guarantees bank deposits up to
a. $100,000. b. $200,000. c. $250,000. d. $500,000.