If the nominal interest rate is 6 percent and the rate of inflation is 10 percent, then the real interest rate is
a. -16 percent.
b. -4 percent.
c. 4 percent.
d. 16 percent.
b
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According to this Application, a study of municipalities in Latin and South America found that a one degree Celsius rise in temperature was associated with
A) no measurable change in per capita income. B) a decline in municipal per capita income. C) a small decline in real income and a small increase in per capita real income. D) a slight increase in municipal per capita income.
Ethan enjoys buying books and going to the movies. He has income of $150 to spend on these two goods each month. The price of a book is $15 and the price of going to the movies is also $15. He currently consumes four books and six movies a month. If the price of a book increases to $20, then:
A. the substitution and income effects would both predict Ethan would consume more of both goods. B. the substitution and income effects would both predict Ethan would consume less of both goods. C. the substitution effect would predict Ethan would consume more books and less movies, and the income effect would predict he would consume less of both. D. the substitution effect would predict Ethan would consume less books and more movies and the income effect would predict he would consume less of both.
City streets, sewage systems, and police protection are all examples of
a. public goods b. private goods c. exclusive goods d. rival goods e. consumer goods
A contractionary monetary policy tends to be more effective than a contractionary fiscal policy at strengthening the value of the exchange rate, because a contractionary monetary policy:
A. increases the interest rate and decreases imports, while contractionary fiscal policy decreases both the interest rate and imports. B. increases the interest rate and decreases exports, while a contractionary fiscal policy decreases both the interest rate and exports. C. decreases the interest rate and increases imports, while a contractionary fiscal policy increases both the interest rate and imports. D. decreases the interest rate and increases exports, while a contractionary fiscal policy increases both the interest rate and exports.