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1. Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly. a. The nominal interest rate is
1. Using the information in this chapter, label each of the following statements true, false, or uncertain. Explain briefly. a. The nominal interest rate is measured in terms of goods; the real interest rate is measured in terms of money. b. As long as expected inflation remains roughly constant, the movements in the real interest rate are roughly equal to the movements in the nominal interest rate. c. The nominal policy interest rate was at the zero lower bound in the United States in 2013. d. When expected inflation increases, the real rate of interest falls. e. All bonds have equal risk of default and thus pay equal rates of interest. f. The nominal policy interest rate is set by the central bank. g. An increase in a bank's leverage ratio tends to increase both the expected profit of the bank and the risk of the bank going bankrupt. h. The real borrowing rate and the real policy rate always move in the same direction. i. It can be difficult to value assets of banks and other finan- cial intermediaries. particularly in a financial crisis. j. When a bank has high leverage and low liquidity, it may have to sell assets at fire sale prices. k. Banks and other financial intermediaries have assets that are less liquid than their liabilities. 1. House prices have risen constantly since the year 2000. m. The fiscal stimulus program adopted by the United States in response to the financial crisis helped offset the decline aggregate demand and reduce the size of the recession. n. The fiscal stimulus program adopted by the United States in- cluded a large increase in the deficit measured as a percent of GDP
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