In the rational expectations model
a. markets are perfectly competitive and in equilibrium.
b. markets may not clear even if wages and prices are otherwise perfectly flexible.
c. markets may temporarily be in disequilibrium.
d. only anticipated changes in aggregate demand affect output.
A
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Bringing oil to the market is a relatively long and costly process. The whole process from exploration to pumping significant amounts of oil can take years. What does this indicate about the price elasticity of supply for oil?
A) The elasticity coefficient is likely to be very high and supply is inelastic. B) The elasticity coefficient is likely to be low and supply is highly inelastic. C) The elasticity coefficient is likely to be low and supply is highly elastic. D) The elasticity coefficient is likely to be close to zero and supply is perfectly elastic.
If the real interest rate is 7.5% and the rate of inflation is 3%, what is the nominal interest rate?
A. 4.50% B. 4.57% C. 10.50% D. 10.73%