Question

1.  Suppose you put some money in a bank account.  After one year, you have enough money to buy 3% more worth of goods than you can buy today.  What statement must be true?

A.  Nominal interest rate is 3%

B.  Real interest rate is 3%

C.  Nominal interest rate exceeds real interest rate by 3%

D.  Inflation is 3%

E.  Inflation is negative                                                                                                                                                                   ______

2.  Consumers in a certain region typically buy apples and bananas.  If the price of apples were to rise dramatically, while the price of bananas stays the same, what will likely happen to consumer behavior and CPI?

A.  Consumers will still buy the same number of apples; CPI would rise.

B.  Consumers will still buy the same number of apples; CPI would stay the same.

C.  Consumers will buy fewer apples and more bananas; CPI would rise.

D.  Consumers will buy fewer apples and more bananas; CPI would stay the same.                          ______

3.  If a government of a closed economy has a budget deficit, what must be true about private savings and national savings?

A.  Private savings < 0

B.  Private savings = 0

C.  Private savings = national savings

D.  Private savings > national savings

E.  Private savings < national savings                                                                                                                                  ______

Answer 1

a) "B"

if the real interest rate in the market is 3% then only it will be 3% increase in the purchasing power.

b) "C"

Consumer will reduce the consumption of costlier good and choose cheaper available goods. CPi would rise because Apples are part of CPI.

c) "A"

Private saving in this market is less than 00.