Some economists believe that government bailouts privatize the benefits of doing business and socialize the costs, leading to more companies needing to be bailed out

Loretta agrees to lend Ted $500,000 to buy computers for his consulting firm. They agree to a nominal interest rate of 8%. Both expect the inflation rate to be 2%

(a) Calculate the expected real interest rate. (b) If inflation turns out to be 3% over the life of the loan, what is the real interest rate? Who gains from unexpectedly high inflation, Loretta or Ted? (c) If inflation turns out to be 1% over the life of the loan, what is the real interest rate? Who gains from unexpectedly low inflation, Loretta or Ted?

Which of the following describes a situation in which demand must be inelastic?

A. Total revenue decreases by 10 percent when the price of spats rises by 10 percent. B. Total revenue decreases by less than 10 percent when the price of spats rises by 10 percent. C. Total revenue increases by more than 10 percent when the price of spats rises by 10 percent. D. Total revenue decreases by $10 when the price of spats rises by $10.