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Question

1.The real rate of interest can be viewed as the time value of not consuming.

2.The current rate of inflation affects the expected level of interest rates.

3.The market rate of interest can be viewed as the real rate of interest plus a premium for the expected rate of inflation.

4.Declining interest rates can be caused by an upward shift in the demand for loanable funds relative to the supply of loanable funds.

5.The expected real rate of interest is likely to be negative.

6.The realized real rate of interest can be negative if expected inflation is less than actual inflation.

7.An increase in desired investment shifts the desired savings supply line upward to higher real rates of interest.

8.Nominal interest rates reflect anticipated inflation.

9.Expected increased inflation usually drives up bond prices.

10.Interest rates are directly related to inflation expectations and inversely related to the level of economic activity.

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