If expected inflation is 2%, the real interest rate is 7% and the economy is growing at a rate of 4%, the nominal interest rate is equal to
a. 9%
b. 5%
c. 7%
d. 6%
e. none of the above
a. 9%
(Real Interest Rate=Nominal Interest Rate - Inflation)
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Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week:
A. demand will become more price elastic. B. price elasticity of demand will not change as price is lowered. C. demand will become less price elastic. D. the elasticity of supply will increase.
All of the following are examples of the law of diminishing control that followed banking regulations put in place after the Great Depression except:
A. banks created new instruments to circumvent the law. B. politicians were pressured to dismantle the regulations. C. financial business migrated to unregulated institutions. D. depositors demanded financial institutions be responsible for their financial decisions.
During recessions, the change in real GDP is:
A. always negative. B. most often negative, but occasionally positive. C. always positive. D. most often positive, but occasionally negative.
If the cross-elasticity of goods X and Y is negative, then the sales of X move:
A. in the opposite direction as the price of Y, and X and Y are substitute goods. B. in the opposite direction as the price of Y, and X and Y are complementary goods. C. in the same direction as the price of Y, and X and Y are complementary goods. D. in the same direction as the price of Y, and X and Y are substitute goods.