Which of the following statements best describes the parity concept?
A. The prices of farm commodities should vary inversely with changes in the prices-paid index
for farmers.
B. Because of productivity increases, farmers are entitled to the same real income for a
smaller volume of output.
C. The money incomes of farmers should always be the same, regardless of increases or
decreases in the prices of the products they buy.
D. The production of a given real output entitles the producer to the same real income over
time.
Answer: D
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Suppose the nominal interest rate on a savings bond is 7 percent a year and the inflation rate is 4.5 percent a year. How much is the real interest rate?
A) 4.5 percent B) 1.56 percent C) 2.5 percent D) 7 percent E) 11.5 percent
The most important role of the Federal Reserve in today's US economy is
A. Negotiating with foreign nations to reduce the enormous trade deficit B. Controlling the money supply to pursue economic objectives C. Balancing the government's budget by increasing taxes and cutting spending