Econ 311 Quiz 5 solutions

Econ 311 Quiz 5 solutions - Intermediate Macroeconomics...

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Quiz 5: November 30, 2007; 9AM Note : This is a closed book assignment. You may use calculators. YOUR NAME: ________________________________ Directions : Answer each of the following questions. You must show all your work. Partial credit will be awarded (but it will be easier to do so if you show your work!). QUESTION 1: Multiple Choice (9 Points) Choose the one alternative that best completes the statement or answers the question. 1) Inflation has no effect on an economy's well-being if A) the nominal rate of interest for both savers and borrowers rises by an amount just equal to the rate of inflation. B) Only real (not nominal) interest income is taxable . C) it is universally and accurately anticipated. D) all of these 2) The real rate of interest A) is equal to the nominal rate plus the rate of inflation. B) is equal to the nominal rate minus the rate of inflation. C) is never negative. D) is equal to the nominal rate when Y equals YN. 3) The actual real interest rate and the expected real interest rate will be identical if A) pe = p. B) pe < p. C) pe > p. D) none of the above 4) "Natural unemployment" is not zero because includes those out of work because of A) structural (or mismatch) unemployment caused by normal technological change in production. B) expected or normal turnover which will always characterize a part of the labor force. C) a recession. D) A and B 5) Over a year, the money supply in a nation grew by 6 percent, while velocity fell by 1 percent and real GDP rose by 2 percent. This results in an inflation over the year of ____ percent. (a) 9
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Econ 311 Quiz 5 solutions - Intermediate Macroeconomics...

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