Money eliminates the need to barter

As actual output falls below the potential level in the short run, which of the following is most likely to occur? a. More resources will become unemployed. b. The price level will increase

c. Real GDP will increase. d. Nominal GDP will remain constant. e. The natural rate of unemployment will fall.

If a lender expects inflation to be 5 percent, and after a loan is made, actual inflation is 10 percent, which of the following will be true?

a. The lender will receive a lower real interest rate than he expected. b. The loan will be repaid with dollars that are worth more than the lender expected. c. The nominal rate of interest can be expected to fall in the future. d. The lender will gain at the expense of the borrower.