Suppose that the expected inflation rate is 3 percent and the actual inflation rate is 6 percent. Then borrowers
A. are worse off and lenders are better off.
B. and lenders are both worse off.
C. are better off and lenders are worse off.
D. and lenders are both better off.
Answer: C. are better off and lenders are worse off.
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The temporary producers' surpluses earned in the short run by factors that are inelastically supplied are called
a. regressive rents. b. transitory rents. c. windfall rents. d. quasi-rents.
The U.S. economy is unique for both its size and prosperity.
Answer the following statement true (T) or false (F)
The price elasticity of demand for gasoline is 0.40. If the price of gasoline rises by 20 percent, there will be
A) a decrease of more than 20 percent in the quantity of gasoline demanded. B) an increase in the total revenue received from the sale of gasoline. C) a loss of total revenue for gasoline producers, because at a higher price the quantity of gasoline demanded decreases. D) no change in the quantity of gasoline sold because people need gasoline.
Assume that the government increases spending and finances the expenditures by borrowing in the domestic capital markets. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and reserve-related (central bank) transactions in the context of the Three-Sector-Model?
a. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more positive (or less negative). b. The real risk-free interest rate rises, and reserve-related (central bank) transactions become more negative (or less positive). c. The real risk-free interest rate rises, and reserve-related (central bank) transactions remain the same. d. There is not enough information to determine what happens to these two macroeconomic variables. e. The real risk-free interest rate falls, and reserve-related (central bank) transactions become more negative (or less positive).