The rate of interest that you are paying on a mortgage loan is 6.5 per cent per year. Inflation is running at 3 per cent per year. The real rate of interest that you are paying is therefore:

a.0.5 percent

b.6 percent

c.3.5 percent

d.9 percent

Which of the following is a definite consequence of a high inflation rate?

a.It reduces everyone's real wealth and real income.

b.It can distort price signals.

c.It makes poor people worse off.

d.It makes borrowing more expensive.

Which of the following propositions best sums up the core of 'Keynesian' economics?

a.Fiscal austerity is required in recessions

b.In the short-run, output depends on the level of aggregate demand.

c.Consumption does not depend on income

d.Supply creates its own demand