Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 percent, the money, or nominal interest rate, will be
a. 1 percent.
b. 4 percent.
c. 7 percent.
d. 8 percent.
D
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The government of Economica announces that it will purchase its farmers’ surplus of milk. From this announcement, you can infer that Economica has a
A. free market for milk. B. price ceiling above the equilibrium price for milk. C. price floor above the equilibrium price for milk. D. price floor below the equilibrium price for milk.
One policy that would increase the saving rate would be
A) raising taxes on the returns to saving. B) raising taxes on the returns to investment. C) taxing consumption. D) raising taxes on saving.
Recall the Application about cultural factors in England and their relevance to the Industrial Revolution to answer the following question(s). The Application cites a study by Galor and Moav (2002) that found that families with fewer children gained a comparative advantage in the evolutionary cycle because:
A. they invested more human capital on their offspring than the families with more children. B. having more children led to more chaos. C. having more children meant more workers in the farms. D. they lived in cities while families with more children lived in the countryside.
The two primary reasons to adopt measures to restrict trade are that
A. they help keep real wages high in the importing country, and they also permit small businesses to compete in international markets. B. they may help the importing country improve its educational system, and they keep high-technology products from being stolen by foreign competitors. C. they may help the importing country get better prices for its goods, and they protect certain industries from foreign competition. D. they may help advance the political goals of the nation, and they encourage productivity in domestic industries.