1. In periods of high inflation, the real value of loan payments tends to be:

a. low in the early years of paying back, and high in the later years

b. high in the early years of paying back, and low in the later years

c. constant over the pay-back period

d. rising in early years, and falling in later years.

2. A bond pays $50 at the end of each year for three years. The interest rate is 10%. The duration of that bond is

a. 3 years

b. 2 years

c. 1 year

d. between 1 and 2 years e. between 2 and 3 years

3. The market of apples has the following supply and demand equations: Supply: P=2+3Q

Demand: P=20-Q

If the government were to impose a tax on apples, who would bear the biggest share of tax burden?

a. Consumers

b. Producers

c. They would share it equally

d. There is not enough information