If individuals are convinced that the government will take care of all their medical needs after they retire, then
A) the supply of loanable funds will shift rightward.
B) the supply of loanable funds will shift leftward.
C) the demand for loanable funds will shift rightward.
D) the demand for loanable funds will shift leftward.
B
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The U.S. government need never default on its debt because
a. it can easily nationalize banks, who own all the debt, and then owe it to itself. b. it can raise the funds it needs to repay by taxation, and it can print money to repay. c. it owes the debt to itself, and it can always ignore a demand for repayment. d. it can simply reduce spending enough to generate funds to repay its debt.
According to the theory of rational expectations, errors in predicting inflation will
A. be biased upward more often than not. B. be purely random. C. tend to be biased downward when inflation is rising and tend to be biased upward when inflation is falling. D. tend to be biased upward when inflation is rising and tend to be biased downward when inflation is falling.