Would it make sense to buy a house when mortgage rates are 14% and expected inflation is 15%? Explain your answer
What will be an ideal response?
Even though the nominal rate for the mortgage appears high, the real cost of borrowing the funds is -1%. Yes, under this circumstance it would be reasonable to make this purchase.
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Other things remaining constant, higher trade deficits in the U.S. will lead to: a. U.S citizens buying greater foreign securities
b. an increase in domestic savings in the U.S. c. a decrease in the demand for U.S. dollars. d. an increase in funds from abroad. e. an increase in the standard of living of the U.S residents.
Pollution taxes are more efficient in cleaning up the environment than direct controls. What role is there for direct controls?
a. They are useful standby mechanisms. b. They are useful if it is decided to prohibit the substance altogether. c. They are useful where dependable metering devices are not available or prohibitively costly to install. d. All of the above are true.