In the long run, the nominal interest rate is
A) negatively related to the inflation rate.
B) positively related to the inflation rate.
C) negatively related to the price level.
D) positively related to the price level.
E) not related to the price level or the inflation rate.
B
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Suppose that three oligopolistic firms are currently charging $12 for their product. The three firms are about the same size
Firm A decides to raise its price to $18, and announces to the press that it is doing so because higher prices are needed to restore economic vitality to the industry. Firms B and C go along with Firm A and raise their prices as well. This is an example of A) price leadership. B) collusion. C) the dominant firm model. D) the Stackelberg model. E) none of the above
In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except
a. establishing a bond forfeited by violating the commitment b. investing in a non-redeployable reputational asset tied to the promise or threat c. interrupting the communication of negotiated compromises d. offering a warranty e. delivering a hostage (e.g., a patent license triggered by violating the promise)
As large-scale production became more profitable during the Industrial Revolution, the easiest way to finance the required factories and heavy machinery was
a. sole proprietorships b. limited liability partnerships c. letting government take over d. the corporate structure e. family businesses
The real interest rate is:
A. adjusted for inflation. B. the reported interest rate, not adjusted for inflation. C. the interest rate paid to savers. D. the interest rate charged to borrowers.