Assume that the real rate of interest is 5 percent and a lender charges a nominal interest rate of 15 percent. If a borrower expects that the rate of inflation next year will be 10 percent and the actual rate of inflation next year is 10 percent,
A. the lender benefits from inflation, while the borrower loses from inflation.
B. the borrower benefits from inflation, while the lender loses from inflation.
C. neither the borrower nor the lender benefits from inflation.
D. both the borrower and the lender lose from inflation.
Answer: C
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Refer to Figure 7-3. With a quota in place, what is the quantity consumed in the domestic market and what portion of this is supplied by imports?
A) Domestic consumption equals 28 million pounds of which 18 million pounds are imports. B) Domestic consumption equals 34 million pounds of which 18 million pounds are imports. C) Domestic consumption equals 40 million pounds of which 22 million pounds are imports. D) Domestic consumption equals 34 million pounds of which 16 million pounds are imports.
Describe the prisoners' dilemma game and explain why the Nash equilibrium delivers a bad outcome for both players
What will be an ideal response?