Quiz 8

1. inflation on the nominal interest rate in the short run.
2. inflation on the natural real interest rate in the short run.
3. inflation on the real interest rate in the short run.
4. inflation on the nominal interest rate in the medium run.

1. the real interest rate to increase
2. the demand for money to decrease
3. the expected inflation rate to increase
4. all of the above
5. none of the above

1. undefined.
2. zero.
3. equal to the last of the payments.
4. equal to the square of the sum of all payments.
5. equal to the sum of all payments.

1. $180.00
2. $240.00
3. $166.67
4. $150.00
5. $160.00

1. equal to the nominal interest rate.
2. greater than zero.
3. negative.
4. less than the nominal interest rate.
5. any of the above, depending on the absolute value of the negative expected inflation rate.

1. The LM curve becomes steeper.
2. An increase in the expected inflation rate will make the LM curve shift down.
3. A change in expected inflation will have no effect on the position of the LM curve.
4. An increase in the expected inflation rate will make the LM curve shift up.
5. none of the above

1. 2%.
2. 3%.
3. 6%.
4. 12%.
5. 9%.

1. $413.22.
2. $350.00.
3. $480.00.
4. $454.45.
5. $490.00.

1. a decrease in output.
2. an increase in the real interest rate.
3. a decrease in the nominal interest rate.
4. all of the above
5. none of the above

1. lower real interest rates and lower nominal interest rates.
2. lower real interest rates and higher nominal interest rates.
3. higher real interest rates and lower nominal interest rates.
4. higher real interest rates and higher nominal interest rates.
5. none of the above

1. how many dollars we must give up today in order to have more dollars next year
2. how many dollars we must give up next year in order to have more dollars today
3. how many dollars we must give up next year in order to consume more goods today
4. how many dollars we must give up today in order to consume more goods today
5. how many goods we must give up next year in order to consume more goods today

1. the natural real interest rate to rise.
2. the natural real interest rate to fall.
3. ambiguous effects on the natural real interest rate.
4. no effect on the natural real interest rate.

1. $5,000.00.
2. $454.54.
3. $500.00.
4. $490.00.
5. $510.00.

1. the IS curve to become flatter.
2. the IS curve to become steeper.
3. the IS curve to shift rightward.
4. the IS curve to shift leftward.
5. no change in the IS curve.

1. equal to the expected rate of inflation.
2. the interest rate in terms of goods.
3. always less than the real interest rate.
4. equal to the real interest rate minus the rate of inflation.
5. the kind of interest rate reported in the financial pages of newspapers.

1. an increase in the real interest rate.
2. a reduction in the real interest rate.
3. a reduction in investment.
4. a reduction in money demand.
5. both A and C

1. will rise, but only if the drop in the nominal rate is greater than the increase in expected inflation.
2. must fall.
3. will fall, but only if the drop in the nominal rate is smaller than the increase in expected inflation.
4. cannot be defined.
5. must rise.

1. a reduction in the real interest rate.
2. an increase in the real interest rate.
3. a reduction in money demand.
4. a reduction in investment.

1. the natural real interest rate to rise.
2. the natural real interest rate to fall.
3. ambiguous effects on the natural real interest rate.
4. no effect on the natural real interest rate.

1. either the real interest rate or the expected inflation rate.
2. the real interest rate only.
3. the expected inflation rate only.
4. the nominal interest rate only.
5. both the nominal and real interest rates.

1. $500.00.
2. $952.06.
3. $150.00.
4. $750.00.
5. none of the above

1. the real interest rate is negative.
2. the real interest rate is higher than the nominal interest rate.
3. the real interest rate is positive.
4. none of the above

1. r_n - g_m
2. r_n
3. ^g_Y + ^g_m
4. r_n - π^e
5. none of the above

1. the natural real interest rate to rise.
2. the natural real interest rate to fall.
3. ambiguous effects on the natural real interest rate.
4. no effect on the natural real interest rate.

1. either the nominal or real interest rate must be negative.
2. deflation must be occurring.
3. expected inflation must be negative.
4. both the nominal and real interest rates must be negative.
5. none of the above