If you expect the inflation rate to be 4 percent next year and a one year bond has a yield to maturity of 7 percent, then the real interest rate on this bond is

Using the concept of income and substitution effects, explain how you might react to each of the following:

(a) You currently work 20 hours a week at $10 per hour and your employer tells you he must reduce your wage to $8 per hour. (b) The price of pizza doubles and the price of hamburgers remains constant.

Under a fixed exchange rate regime, the central bank must act to keep

A) P = P. B) the real exchange rate fixed. C) i = i. D) E = 1. E) none of the above