The real interest rate is
A) the nominal interest rate plus the anticipated inflation rate.
B) the nominal interest rate minus the anticipated inflation rate.
C) the nominal interest rate plus a COLA.
D) the nominal interest rate plus the GDP deflator.
B
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The Fed can control stock market purchases by adjusting the
a. discount rate b. legal reserve requirement c. margin requirement d. federal funds rate e. stock loan rate
Roger has the opportunity to invest $100,000 in two different assets. The investment in Asset #1 will have a present value of $120,000. The investment in Asset #2 is expected to have a future value of $140,000 in four years. If the market interest rate is 5 percent a year, which one would be the better investment?
A. Asset #2, because its future value is greater than the present value of Asset #1 B. Asset #1, because its present value is greater than the future value of Asset #2 C. Asset #2, because its present value is greater than the present value of Asset #1 D. Asset #1, because its present value is greater than the present value of Asset #2
Which of the following statements about asymmetric information is true?
A. Asymmetric information reduces market failures because it makes it easier for individuals to engage in transactions that in the presence of perfect information would take place. B. Asymmetric information occurs when one party to a transaction has relevant information to the transaction that the other party does not have. C. Asymmetric information occurs only in the market for used cars and in the insurance market. D. Asymmetric information can only be solved through government intervention.
Positive market feedback refers to a tendency for
A) potential entrants to an oligopolistic industry to respond to entry deterrence strategies by contemplating setting their prices above prices established by firms already in the industry. B) potential entrants to an oligopolistic industry to respond to entry deterrence strategies by contemplating producing more output than the quantities produced by firms already in the industry. C) a particular product to come into favor with additional consumers because other consumers have chosen to purchase the product. D) price leaders to respond to an increase in market demand by increasing the prices of their products.