The expected value of a future payment differs from the present discounted value in that the expected value
A. Uses a lower interest rate in its calculation.
B. Assumes that future payments take place over a longer period of time.
C. Takes into account the possibility of nonpayment.
D. Uses a higher interest rate in its calculation.
Answer: C
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Picture an economy that is in general equilibrium. What would happen if the natural rate of unemployment were to experience an increase?
A) according to the Phillips curve, the ensuing negative unemployment gap would exert inflationary pressures B) according to Okun's Law, the ensuing negative unemployment gap would be consistent with a positive output gap C) according to the AD-AS framework, the LRAS curve would shift to the left and the ensuing positive output gap would be closed by subsequent leftward shifts in the AS curve to higher equilibrium levels of inflation D) all of the above E) none of the above
The real interest rate is the annual percentage amount of money that is earned on a sum loaned or deposited in a bank
a. True b. False Indicate whether the statement is true or false
Under a system of flexible exchange rates, a decrease in demand for a nation's currency in the foreign exchange market will: a. make it less expensive for foreigners to buy the nation's goods
b. make it more expensive for the nation to import goods. c. cause the nation's balance on current account to shift toward a deficit. d. all of the above
Assume that the central bank purchases government securities in the open market. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and current international transactions in the context of the Three-Sector-Model?
a. There is not enough information to determine what happens to these two macroeconomic variables. b. The real risk-free interest rate falls, and current international transactions become more positive (or less positive). c. The real risk-free interest rate rises, and current international transactions remain the same. d. The real risk-free interest rate rises, and current international transactions become more positive (or less negative). e. The real risk-free interest rate and current international transactions remain the same.