During periods when the inflation rate is positive, how does the real interest rate compare to the nominal interest rate?
What will be an ideal response?
The real interest rate equals the nominal interest rate minus the inflation rate or, by rearranging, the nominal interest rate equals the real interest rate plus the inflation rate. This latter specification shows that when the inflation rate is positive, the nominal interest rate is greater than the real interest rate.
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The market for used cars is shown in the above figure. Neither buyers nor sellers can tell whether any given car is a lemon. Ten percent (10%) of all cars are lemons. Which of the following statements is TRUE?
A) All of the cars will be sold at $1,900. B) No cars will be sold. C) Only lemons will be sold at $1,600. D) Only lemons will be sold at $1,000.
Oligopoly firms: a. usually act as if they were a monopoly producer
b. generally charge a price for goods and services equal to marginal cost. c. base their pricing and output decisions on the likely responses of rival firms. d. are isolated from competition by low barriers to entry.