Explain why countries that have volatile inflation rates are likely to have high nominal interest rates.
What will be an ideal response?
You could argue that volatile inflation means the inflation rate changes, but it doesn't always mean it increases. The rate could also decrease, and then the average rate may not be that bad.So why is the nominal interest rate higher? The answer can be found in the positions of the party and counterparty to any agreement. For example, in a country where inflation is low, a change of 1 percentage point, say from 1% to 2% can benefit one party and harm the other party, but the harm/benefit is somewhat minimal. In a country where inflation may average 4% (for example), but is highly volatile, the volatility can cause the rate to change by a larger amount (more percentage points), meaning the potential harm can be much larger. To compensate for this risk, the nominal interest rates will have to be higher.
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A monopolist is a price maker.
Answer the following statement true (T) or false (F)
If nominal GDP is $12,000 and the GDP deflator is 80, then real GDP is $15,000
a. True b. False Indicate whether the statement is true or false
If average fixed costs equal $60 and average total costs equal $120 when output is 100, the total variable cost must be:
A. $40. B. $60. C. $6,000. D. $8,000.
Explain how the "invisible hand" makes sure that markets reach equilibrium more quickly than they would if the government sets prices for goods.
What will be an ideal response?