Empirical evidence shows that the nominal interest rate typically rises at the same time the inflation rate increases. What does this suggest?
A) The real rate of interest is zero.
B) Increases in the current inflation rate lead borrowers and lenders to expect that inflation in the future will be higher than previously thought.
C) Interest rate changes are the main component of the CPI.
D) Interest rate changes are the main component of the GDP deflator.
B
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Which of the following is NOT an example of a transaction cost?
A) the enjoyment of owning the good B) the opportunity cost of time spent looking for stores that sold the good desired C) the cost of returning a defective product D) time spent bargaining over the price of a good
A production possibilities curve has "good X" on the horizontal axis and "good Y" on the vertical axis. On this diagram, the opportunity cost of good X, in terms of good Y, is represented by the:
a. distance to the curve from the horizontal axis. b. distance to the curve from the vertical axis. c. distance from the origin to the curve. d. change in Y for each change in X along the curve.