Empirical evidence shows that the nominal interest rate typically rises at the same time the inflation rate increases. What does this suggest?
A) The real rate of interest is zero.
B) Increases in the current inflation rate lead borrowers and lenders to expect that inflation in the future will be higher than previously thought.
C) Interest rate changes are the main component of the CPI.
D) Interest rate changes are the main component of the GDP deflator.
B
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Suppose that when one person consumes a good, it is possible to provide it to others at no additional cost. Such a good is called
a. nonexcludable. b. nonrivalrous. c. a free good. d. a Clarke good.
The industrial organization or (IO) perspective predicts
a. firm's profitability differs only if they are in different industries b. firms within an industry are equally profitable c. firm's profitability within industries varies widely d. Only A&B
Suppose a bank is operating with a leverage ratio of 10 . A 6 percent increase in the value of assets
a. will reduce liabilities by 6 percent. b. will result in a 60 percent increase in owner's equity. c. will result in a 60 percent decrease in owner's equity. d. will reduce liabilities by 10 percent.
Which of the following best explains how an economy could simultaneously experience high inflation and high unemployment?
A) The government increases spending without increasing taxes B) The government increase taxes without increasing spending C) Inflationary expectations decline D) Women and teenagers stay out of the labor force E) Negative supply shocks cause factor prices to increase