If a higher inflation is expected, what would you expect to happen to the shape of the yield curve? Why?
What will be an ideal response?
The yield curve should have a steep upward slope. Nominal interest rates will increase if the inflation rate increases, therefore, bond purchasers will require a higher term premium to hold the riskier long-term bond.
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A. panel (b) only. In panel (b), there will be
A. a shortage of wheat. B. a surplus of wheat. C. equilibrium in the market. D. lines of people waiting to buy wheat.
In the presence of discrimination by customers,
a. market forces nevertheless always work to prevent discriminatory wage differentials. b. discriminatory wage differentials can exist, but only if firms refrain from maximizing their profits. c. discriminatory wage differentials can exist, but only if government reinforces customers' practices by passing laws that mandate discrimination. d. discriminatory wage differentials can exist, even in the absence of discriminatory practices by firms or by government.