The nominal interest rate is equal to the:
a. Real risk-free interest rate plus expected inflation.
b. Real interest rate plus risk premium plus tax/subsidy premium plus maturity premium.
c. Real interest rate plus risk premium plus tax/subsidy premium plus maturity premium plus expected inflation.
d. Real interest rate plus expected inflation.
e. None of the above.
Question 2 - Assume that foreign capital flows from a nation increase due to political uncertainly and increased risk. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and real GDP in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls and real GDP falls.
b. The quantity of real loanable funds per time period falls and real GDP rises.
c. The quantity of real loanable funds per time period rises and real GDP remains the same.
d. The quantity of real loanable funds per time period and real GDP remain the same.
e. There is not enough information to determine what happens to these two macroeconomic variables.
Question 3 - Huntington said that future conflict will be based on:
a. economics
b. ideology
c. geography
d. differences in civilizations
e. all of the above
Question 4 - If supply is upward-sloping and demand is downward sloping, what happens to the equilibrium real risk-free interest rate and quantity of real loanable funds per time period if there is a decrease in the expected rate of inflation?
a. The real risk-free interest rate rises and the quantity per time period falls.
b. The real risk-free interest rate rises and the quantity per time period rises.
c. The real risk-free interest rate does not change and the quantity per time period does not change.
d. The real risk-free interest rate rises and the quantity per time period is uncertain.
e. The real risk-free interest rate is uncertain and the quantity per time period is uncertain.
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