Answer the following questions true (T) or false (F)
1. If inflation is higher than expected, this helps borrowers (by reducing the real interest rate they pay) and hurts lenders (by reducing the real interest rate they receive).
2. The costs to firms of changing prices are called menu costs.
3. If inflation is unanticipated, no redistribution of income can occur.
1. TRUE
2. TRUE
3. FALSE
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The figure above shows the loanable funds market. The equilibrium real interest rate is ________, and the equilibrium quantity of loanable funds is ________
A) 4 percent; $1.5 trillion B) 4 percent; $2.5 trillion C) 6 percent; $2.0 trillion D) 8 percent; $1.5 trillion E) 0 percent; $3.5 trillion
In international trade, an infant industry is one:
a. that protects firms that produce products for infants. b. with a large number of very small firms. c. in which the firms are experiencing very small profits. d. in the early stages of its development.