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Unformatted text preview: Macroeconomics Test Yourself Chapter14 1. The real interest rate tells us a. how much consumption we must give up next year in order to consume more goods today. b. how many dollars we must give up next year in order to consume more goods today. c. how many dollars we must give up next year in order to have more dollars today. d. how many dollars we must give up today in order to have more dollars next year. e. how many dollars we must give up today in order to consume more goods today. 2. The nominal interest rate is a. the interest rate in terms of goods. b. always less than the real interest rate. c. equal to the real interest rate minus the rate of inflation. d. the kind of interest rate reported in the financial pages of newspapers. e. equal to the expected rate of inflation. 3. If the nominal interest rate in year t is 10%, and the expected inflation rate for year t is 2%, then the expected real interest rate in year t is approximately: a. 2% b. 5% c. 8% d. 10% e. 12% 4. Whenever the inflation rate is positive, a. the real interest rate must be less than the nominal interest rate. b. the real interest rate must be negative. c. the real interest rate must be positive. d. the nominal interest rate must be negative. e. none of the above. 5. If the nominal interest rate rises, and the expected inflation rate falls, then the real interest rate a. must rise. b. must fall. c. cannot be defined. d. will rise, but only if the rise in the nominal rate is greater than the drop in expected inflation. e. will fall, but only if the rise in the nominal rate is smaller than the drop in expected inflation. 6. Under which of the following assumptions would the nominal and real interest rates be equal? a. Expected inflation is equal to the nominal interest rate....
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 Summer '07
 Safarzadeh
 Business, Macroeconomics, Interest, Interest Rate

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