For inflation to have no real effect on the economy, leaving all decisions and their real outcomes unchanged, five conditions must be met. Which of the following incorrectly states one of those conditions?
A) Inflation is universally and accurately anticipated.
B) All savings and money earn the nominal interest rate.
C) Inflation of p0 percent lowers the nominal interest rate by p0 below the no-inflation nominal rate.
D) Only real interest income is taxable and only the real cost of borrowing is tax-deductible.
E) Inflation raises the prices of all goods by the same percentage.
C
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How does the federal government finance a budget deficit?
A) It borrows funds by selling Treasury bonds. B) It cuts spending on entitlement programs. C) It redeems its IOUs. D) It purchases U.S. Treasury bonds.
Disposable income is National income
A) less taxes collected from households and firms by the government. B) plus net taxes collected from households and firms by the government. C) less net taxes collected from firms by the government. D) less net taxes collected from households by the government. E) less net taxes collected from households and firms by the government.