The real rate of interest equals 3%, and the expected rate of inflation equals 2%. The nominal rate of interest is
A. 0%.
B. 5%.
C. 1%.
D. -1%.
Answer: B
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
The above figure shows the market for neckties after the government has imposed a tax. How much government revenue is generated by the tax?
A) $1,000.00 per month B) $800.00 per month C) $500.00 per month D) $400.00 per month
The dual nature of most developing countries implies that:
A. their financial sectors are not integrated into Western financial markets. B. only a portion of their financial sectors are integrated into Western financial markets. C. their financial sectors are similar to Western financial markets. D. their financial sectors are fully integrated into Western financial markets.
Which of the following statements regarding an average-cost pricing rule for a natural monopoly is WRONG?
A) It sets price equal to average total cost. B) It is efficient. C) The firm makes zero economic profit. D) More output is produced than if the firm maximized profit.