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QUESTION 7 Suppose people expect inflation to be 3 percent during the next several years. When the real interest rate is 5 peYou just bought a $1,000 bond that is scheduled to mature in ten years. If interest rates rise during the next six months, th

Hello! Could you please answer all questions? I think the ones I put in blue are correct but I am not too sure.

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Answer #1

7. d
(Nominal interest rate = real interest rate + inflation rate = 5+3 = 8)

8. b
(Labor supply curve will be upward sloping.)

9. d
(As exports decrease so equilibrium quantity decreases and dollar depreciates.)

10. c
(As exports > imports, so there is net inflow of capital.)

11. c
(Market value of bond decreases with increase in interest rate.)

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