Which of the following statements gives the correct definition of the real deficit?
A. Real deficit = Nominal deficit + (inflation × total debt)
B. Real deficit = Nominal deficit + (total debt/inflation)
C. Real deficit = Nominal deficit - (inflation × total debt)
D. Real deficit = Nominal deficit - (total debt/inflation)
Answer: C
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The zero lower bound on the nominal interest rate arises because
A) if the nominal interest rate were less than zero, an arbitrage opportunity would exist. B) bank profits must be zero. C) the government would not allow it. D) the economy would crash.
Intermediaries, known as middlemen, specialize in
A) reducing transaction costs. B) negotiating high prices for sellers. C) negotiating low prices for buyers. D) encouraging consumers to buy goods on credit, rather than with cash.
In the equation of exchange, "PQ" stands for
A) GDP. B) Real GDP. C) nominal investment. D) real investment.
Something that would not be considered a tool in pursuit of industrial policy would be:
A. incentives for foreign direct investment. B. incentives for foreign portfolio investment. C. investment in research. D. All of these are examples of industrial policies.