At full employment, an increase in the quantity ofmoney (ceteris paribus) can startSelect one:a. demand-pull inflation, as can an increase ingovernment expenditure.4b. demand-pull inflation, but an increase ingovernment expenditure cannot.c. cost-push inflation, but an increase ingovernment expenditure cannot.d. demand-pull and a cost-push inflation, ascan an increase in government expenditure.e. cost-push inflation, as can an increase ingovernment expenditure.%5^6MacBook Pro19&78(90Safari Touch ID te1 PEIon 5moodle31.upei.caAccessdeck Old-Moodle English (en)Suppose the tax rate on interest income is 50percent, the real interest rate is 3 percent, and theinflation rate is 4 percent. The real after-taxinterest rate isSelect one:a. 3.0 percent.b.-3.5 percent.c. 3.5 percent.d. -0.5 percent.e. 4.0 percent.An unanticipated deflation does all of the following

Cost-push inflation (also known as wage-push inflation) occurs when overall prices increase…

Suppose the tax rate on interest income is 50 percent, the real interest rate is 3 percent, and the inflation rate is 4 percent. The real after-tax interest rate is Select one: a. 3.0 percent. b. -3.5 percent. c. 3.5 percent. d 0.5 percent

Suppose the tax rate on interest income is 50 percent, the real interest rate is 3 percent, and the inflation rate is 4 percent. The real after-tax interest rate is Select one: a. 3.0 percent. b. -3.5 percent. c. 3.5 percent. d 0.5 percent

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The economy starts out at full-employment equilibrium. Some events then occur that generate cost-push inflation. Which of the following events might cause cost-push inflation? A. a decrease in exports. B. an increase in the money wage rate or firms raise prices C. an increase in the quantity of money. D. a decrease in government expenditure.
Suppose that over the past year, the real interest rate was 3 percent and the inflation rate was 1 percent. It follows that Select one: a. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 3 percent. b. the dollar value of savings increased at 2 percent, and the purchasing power of savings increased at 4 percent. C. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 2 percent. d. the dollar value of savings increased at 4 percent, and the purchasing power of savings increased at 3 percent.
If the nominal rate of interest is 5 percent for a bond issued by the United States Government and the inflation rate is 2 percent, the real rate of interest is ___. The nominal rate of interest will _______ if the inflation rate rises or increases to 6 percent (that is, the inflation rate increases by 4 percent). A. unknown; rise by 4 percent B. 3 percent; rise by 4 percent C. 3 percent; fall by 4 percent D. 7 percent; fall by 4 percent
1. Currently the prime interest rate, which is the interest rate given to customers with the best credit, in the United States is 3.25% and the inflation rate is 1.3%. a. How much is the real interest rate? b. What will happen to the real interest rate if – all else equal – the inflation rate increases? Provide an example to support your answer. How will the change in the real interest rate from part b, affect the quantity of savings in the United States? How will this change affect the supply of loanable funds. C.
5. What is the real interest rate if Mr. Nasser took a loan of OMR 10000 and the nominal interest rate is 15%, the inflation rate is 10? a.2% b.3% c.5% d.6% 6. Which of the following defines a contractionary policy? a.Monetary and fiscal policy that speeds up the economy b.Monetary and fiscal policy that slows down the economy c.Unemployment and tax policy that speeds up the economy d.Exchange and wage policy that speeds up the economy
10. Under the following conditions, estimate the price of an item during year 3 A. If it is estimated that its price at the beginning of the analysis is $8.50 and suffers an inflation of 5.5% per year. B. If it is estimated that its price at the beginning of the analysis is $8.50 and it suffers an inflation in year 1 of 3%, in year 2 of 5% and in year 3 of 2%. C. If it is estimated that its price in the first year of the analysis will be $8.50 and it suffers an inflation of 5% per year. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
8. The price level was 118.3 in 1988, 124.0 in 1989, and 130.7 in 1990. What were the rates of inflation for 1989 and 19907? If people expect the rate of inflation to be the average rate of inflation for the previous 2 years, what was the expected rate of inflation for 1991? The nominal interest rate in 1991 was 5.4 percent. What was the real interest rate?
5. Assuming that nominal interest rates stay the same, an decrease in the rate of inflation would raise the real interest rate, which would tend to: a. increase or decrease investment spending. b. increase investment spending. c. not affect investment spending d. decrease investment spending.
When lenders begin to expect higher levels of future inflation, a. Nominal interest rates today will fall as lenders try to maximize profits. b. Nominal interest rates today will rise and the price of consumption from a loan will fall. c. Nominal interest rates today will rise and the price of consumption from a loan will rise. d. There will be no change in nominal interest rates if the real rate of return remains greater than zero.
4. If the nominal interest rate is fixed over the life of a loan, the consequences of inflation being higher than expected are that A. the real interest rate will be higher than expected, and the lender will benefit. B. the real interest rate will be lower than expected, and the lender will benefit. C. the real interest rate will be lower than expected, and the borrower will benefit. D. the real interest rate will be higher than expected, and the borrower will benefit. E. the real interest rate will remain unchanged over the life of the loan, and the lender will benefit at the expense of the borrower. 5. Under what circumstance would the nominal interest rate be positíve but the real interest rate be negative? A. Expected inflation is negative. B. Expected inflation is zero. C. Expected inflation is exactly equal to the nominal interest rate. D. Expected inflation is greater than the nominal interest rate.
4. In which of these situations is the real interest rate NEGATIVE? A) The nominal interest rate is 3% and the inflation rate is 4% B) The nominal interest rate is -5% and the inflation rate is -6% C) The nominal interest rate is 2% and the inflation rate is -1% D) The nominal interest rate is 4% and the inflation rate is 4%
13. Which of the following cannot be used to measure inflation?a) GDP deflationb) Expenditure methodc) Producer price indexd) Consumer price indexWhich of the following equations in correct?a) Nominal interest rate = Real interest rate-Inflationb) Real interest rate = Nominal interest rate + inflationc) Real interest rate = Nominal interest rate x inflationd) Real interest rate = Nominal interest rate-inflation