In making promises that are not guaranteed by third parties and in imposing penalties that are not enforced by third parties, all of the following are credibility-enhancing mechanisms except
a. establishing a bond forfeited by violating the commitment
b. investing in a non-redeployable reputational asset tied to the promise or threat
c. interrupting the communication of negotiated compromises
d. offering a warranty
e. delivering a hostage (e.g., a patent license triggered by violating the promise)
d
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Which of the following transactions would be excluded in the capital account?
a. A Japanese citizen purchases a U.S. Treasury bill. b. A Japanese citizen purchases an office building in Manhattan. c. A U.S. citizen purchases a share of stock from a Japanese company. d. An American purchases a Toyota.
If the nominal interest rate is 3 percent and the inflation rate is 4 percent, then the real interest rate is
a. 7 percent. b. -1 percent. c. 3 percent. d. 4 percent.