Ms. Smith has $10,000 in her saving account that pays her a 3% interest rate. If the inflation rate is 5%, Ms. Smith will
a. gain buying power because both the interest rate and the inflation rate are positive.
b. lose buying power because the inflation rate is positive.
c. lose buying power because the inflation rate is greater than the interest rate.
d. lose buying power because the interest rate is low.
c. lose buying power because the inflation rate is greater than the interest rate.
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How do financial intermediaries reduce risk?
What will be an ideal response?
A multilateral real exchange rate is the
A) government exchange rate. B) index based on the average of the real exchange rates with all other countries in the world. C) adjusted exchange rate. D) index based on the average of the real exchange rates with all U.S. trading partners.
In the above figure, the efficient quantity of magazines to produce per day is
A) 0, because that is where the marginal social benefit exceeds the marginal social cost by as much as possible. B) more than 0 and less than 300,000 magazines. C) 300,000 magazines. D) more than 300,000 magazines.
As the financial crisis became more severe in 2008, the Federal Reserve undertook a(n) ________ of monetary policy, an effect of which is to ________ inflation
A) contraction; raise B) easing; raise C) contraction; lower D) easing; lower E) none of the above