Gladys agrees to lend Kay $1,000 for one year at a nominal rate of interest of 5 percent. At the end of the year prices have actually risen by 7 percent
a. Gladys earns extra real income.
b. Kay loses extra real income.
c. Kay receives extra real income.
d. Neither party gains or loses if the loan is repaid.
c
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Movements in the exchange rate will shift the aggregate demand curve of an economy
a. True b. False Indicate whether the statement is true or false
The predictive accuracy of relative purchasing power parity improves if:
a. Both countries have highly mobile capital markets. b. Both countries have central bank controls in place so that exchange rates change in an orderly manner. c. Both countries under consideration have very high inflation rates. d. Both countries under consideration have high growth rates. e. Both countries are either developed or undeveloped (i.e., one is not developed and the other undeveloped).