If the nominal interest rate is 7 percent and the real interest rate is 2 percent, then what is the inflation rate?
a. 9.0 percent
b. 5 percent
c. 3.5 percent
d. None of the above is correct.
b
You might also like to view...
The unregulated, single-price monopoly shown in the figure above will produce where its demand
A) equals its MC curve. B) equals its ATC curve. C) is inelastic. D) is elastic.
Transactions costs refer to
A) the cost of transporting goods from one destination to another. B) the raw material cost of production. C) the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. D) the implicit costs of production.
When banks fail during a financial crisis, ________
A) the removal of these weak institutions serves to strengthen the financial system B) the elimination of competitors is likely to spark a credit boom C) there is a loss of information that can cause the crisis to worsen D) surviving banks resort to financial engineering to retain customers
Assume that a central bank with a history of inflation announces that it is going to reduce money growth and inflation. According to the rational expectations model, the public will
a. immediately reduce their expected price level and inflation. b. reduce their expected price level if this announcement is credible. c. reduce their money and real wages if this announcement is credible. d. immediately be open to reducing their money wage. e. both b and c.