Trade between nations A and B:
a. leaves the production possibilities of nation A unchanged.
b. leaves the production possibilities of nation B unchanged.
c. increases the consumption possibilities of both nations.
d. All of these are true.
d
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If the nominal interest rate is 4 percent and the inflation rate is 1 percent, then the real rate of interest is
A) 1 percent. B) 3 percent. C) 4 percent. D) 5 percent.
Potential advantages of nominal GDP targeting include
A) it implies that the central bank will respond to slowdowns in the real economy even if inflation is not falling. B) real GDP growth that is below potential or inflation that is below the inflation objective will encourage more expansionary monetary policy. C) it focuses not only on controlling inflation but also explicitly on stabilizing real GDP. D) all of the above.