The opportunity cost of holding money instead of an interest earning asset is the
A) inflation rate minus the real interest rate.
B) inflation rate.
C) real interest rate.
D) nominal interest rate.
E) inflation rate minus the nominal interest rate.
D
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People who took out mortgages at the height of U.S. inflation in 1981:
A. paid much higher real interest rates than expected since inflation fell dramatically after 1981. B. paid much lower real interest rates than expected since inflation fell dramatically after 1981. C. paid much higher real interest rates than expected since inflation rose dramatically after 1981. D. paid much lower real interest rates than expected since inflation rose dramatically after 1981.
A closed economy is one that
A. uses tariffs. B. uses quotas to restrict trade. C. uses exchange controls. D. does not trade with other nations.