If the nominal interest rate is 6 percent and the rate of inflation is 2 percent, then the real interest rate is
a. -4 percent.
b. 3 percent.
c. 4 percent.
d. 8 percent.
c
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Suppose it takes Dan 5 minutes to make a sandwich and 15 minutes to make a smoothie, and it takes Tracy 6 minutes to make a sandwich and 12 minutes to make a smoothie. Which of the following statements is correct?
A. Dan should specialize in both sandwiches and smoothies. B. Dan should specialize in smoothies, and Tracy should specialize in sandwiches. C. Dan should specialize in sandwiches, and Tracy should specialize in smoothies. D. Tracy should specialize in sandwiches and smoothies.
Great Britain opted out of the ERM in 1992 because its government concluded that:
A) it wanted to increase its trade with North America rather than Europe. B) the gains from being a member of the ERM outweighed the costs from higher German interest rates. C) the costs associated with higher German interest rates outweighed the gains from being a member of the ERM. D) it was unable to agree with the French on an exchange rate between the pound and the French franc.
Which of the following is not a component of aggregate demand?
A. Consumption. B. Productivity. C. Investment. D. Net exports.
Expenses that a firm does NOT have to pay out of pocket are
A) wages of employees. B) taxes. C) implicit costs. D) explicit costs.