After a particular loan has been paid off, neither the borrower nor the lender has lost purchasing power. Therefore, it must be true that actual inflation was
a. greater than expected inflation.
b. equal to expected inflation.
c. less than expected inflation.
d. greater than the nominal rate of interest.
b
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In the figure above, Gap's economic ________ is ________
A) loss; $8,000 B) loss; $13,000 C) profit; $7,200 D) profit; $13,000
If a good is produced by firms that generate external costs, the price consumers pay
A) will be efficient as long as it equals the marginal costs of the firms. B) will be too low. C) will be too high because the consumers end up paying the costs instead of the firm. D) will be the correct price, but the quantity sold of the good will be too large.
A natural monopoly exists when, throughout the range of market demand,
a. average cost is increasing b. there are diseconomies of scale c. there are economies of scale d. average cost is constant e. marginal cost exceeds average cost
Answer the following questions true (T) or false (F)
1. In reality, the Fed is unable to use monetary policy to keep real GDP exactly at its potential level. 2. The Fed can use contractionary monetary policy in an attempt to keep inflation from increasing. 3. The Fed can use expansionary monetary policy to lower interest rates to stimulate aggregate demand.