Consider borrowers and lenders who agree to loans with fixed nominal interest rates. If inflation is higher than what the borrowers and lenders expected, then who benefits from lower real interest rates?
A. Only the borrowers benefit.
B. Only the lenders benefit.
C. Both borrowers and lenders benefit.
D. Neither borrowers nor lenders.
Answer: A
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An economist for a bicycle company predicts that, all else held constant, an increase in consumer incomes will increase the demand for bicycles. This prediction assumes that
A. there are many goods that are substitutes for bicycles. B. there are many goods that are complementary to bicycles. C. bicycles are a normal good. D. there are few goods that are substitutes for bicycles.
Moving along the short-run Phillips curve, as the unemployment rate increases, the inflation rate
A) initially increases and then decreases. B) remains unchanged. C) increases. D) decreases. E) initially decreases and then increases.
Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because
a. with shortages and waiting lists, they have no incentive to maintain and improve their property. b. they become resigned to the fact that many of their apartments are going to be vacant at any given time. c. with rent control the government guarantees landlords a minimal level of profit. d. with rent control it becomes the government's responsibility to maintain rental housing.
Producers are willing to offer greater quantities for sale at higher prices because
What will be an ideal response?