Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?
What will be an ideal response?
The lender did not agree to a negative real interest rate, instead unanticipated inflation occurred. If the actual inflation rate exceeds the anticipated inflation rate, the actual real interest rate received by lenders and paid by borrowers can end up negative.
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If the government restricts the selling of corn so that the quantity is less than the equilibrium quantity, then the policy I. creates a deadweight loss. II. decreases total surplus
A) Only I is correct. B) Only II is correct. C) Both I and II are correct. D) Neither I nor II is correct.
Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and supply curves for bicycle helmets. Which panel best describes what happens in this market if there is a substantial increase in the price of bicycles?
A) Panel (a) B) Panel (b) C) Panel (c) D) Panel (d)