The market interest rate in Alpha is 7 percent, and the market interest rate in Beta is 10 percent; the inflation rate in Alpha is 3 percent, and inflation rate in Beta is 8 percent. Which of the following statements is true?
A. The real interest rate is higher in Alpha, but the nominal interest rate is higher in Beta.
B. The real interest rate is higher in Beta, but the nominal interest rate is higher in Alpha.
C. Both the real and nominal interest rates are higher in Beta.
D. Both the real and nominal interest rates are higher in Alpha.
Answer: A
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When a government has decided on a permanent spending increase, a valid reason to increase borrowing rather than taxes might be to ________
A) to avoid an unnecessary stimulus to aggregate demand B) to shift the burden from domestic taxpayers to foreign bond holders C) to avoid distortions that might reduce long-run aggregate supply D) to avoid an increase in income inequality
Which of the following would most likely be a natural monopoly?
a. Gas utility company b. Agricultural firm c. Youth apparel company d. Automotive manufacturer
Suppose a fishing boat reaches its most productive use of each person's talent with 15 crew members. More than 15 workers would cause overcrowding. If there are only 10 crew members currently on the boat, adding one more crew member will
a. require the owner to add another boat b. increase the level of labor productivity c. have no effect on labor productivity d. reduce the need for other variable inputs such as fuel e. reduce the total variable cost of operating the fishing boat
Suppose that Venezuela experiences significant capital outflows after a recent election. If the nation had fixed exchange rates, what effect would these flows have had on Venezuela's overall balance and reserves account?
a. Overall balance would rise and reserves account would fall. b. Overall balance would not change and reserves account would fall. c. Overall balance would fall and reserves account would rise. d. Overall balance would fall and reserves account would fall. e. Overall balance would fall and reserves account would rise.