Learn
Teaching Resources
University Resources
High School Resources
About Us
About Us
Partnerships
Careers
Give Feedback
My Account
Give Feedback
My Account
Practice Questions
Office Hours: Costs of Inflation Practice Questions
As promised, we left you on your own to calculate the final scenario. For the following two questions, use the table below.
1. What is the nominal rate of return after taxes if the nominal interest rate on a savings account is 900% (!)? Assume the government tax rate is ⅓.
*
a. 300%
b. 600%
c. 800%
d. 900%
2. What is the real rate of return after taxes, given that inflation is 897% per year?
*
a. -597%
b. -297%
c. -97%
d. -27%
e. 0%
The above examples assumed that inflation, though very high, was expected. Now let’s see what happens when inflation is high and unexpected. For the next two questions, assume the nominal interest rate is 6% and inflation is unexpectedly 15% that year. Assume the government tax rate is ⅓.
3. What is the nominal rate of return after taxes?
*
a. 0%
b. 2%
c. 3%
d. 4%
e. 6%
4. What is the real rate of return after taxes?
*
a. 19%
b. 4%
c. 0%
d. -7%
e. -11%
Skip to Next Video
Principles of Economics Macroeconomics
Course
(79 videos)
GDP
What Is Gross Domestic Product (GDP)?
Practice Questions
Nominal vs. Real GDP
Practice Questions
Real GDP Per Capita and the Standard of Living
Practice Questions
Splitting GDP
Practice Questions
The Wealth of Nations and Economic Growth
Basic Facts of Wealth
Practice Questions
Growth Rates Are Crucial
Practice Questions
An Orgy of Innovation
Practice Questions
Growth Miracles and Growth Disasters
Practice Questions
The Importance of Institutions
Practice Questions
Geography and Economic Growth
Practice Questions
The Puzzle of Growth
Practice Questions
Growth, Capital Accumulation, and the Economics of Ideas
Introduction to the Solow Model
Practice Questions
Physical Capital and Diminishing Returns
Practice Questions
The Solow Model and the Steady State
Practice Questions
Office Hours: The Solow Model
Practice Questions
Human Capital and Conditional Convergence
Practice Questions
The Solow Model and Ideas
Practice Questions
Office Hours: The Solow Model: Investments vs. Ideas
Practice Questions
The Economics of Ideas
Practice Questions
Patents, Prizes, and Subsidies
Practice Questions
The Idea Equation
Practice Questions
TED Talk: How Ideas Trump Crises
Savings, Investment, and the Financial System
Saving and Borrowing
Practice Questions
What Do Banks Do?
Practice Questions
Intro to Stock Markets
Practice Questions
Intro to the Bond Market
Practice Questions
Office Hours: The Bond Market
Practice Questions
Four Reasons Financial Intermediaries Fail
Practice Questions
The Great Recession
Practice Questions
Personal Finance
How Expert Are Expert Stock Pickers?
Practice Questions
Can You Beat the Market?
Practice Questions
Investing: Why You Should Diversify
Practice Questions
Who Is More Rational? You or the Market?
Practice Questions
Econ Duel: Rent or Buy?
Unemployment and Labor Force Participation
The Economics of Choosing the Right Career
Practice Questions
Defining the Unemployment Rate
Practice Questions
Is Unemployment Undercounted?
Practice Questions
Frictional Unemployment
Practice Questions
Structural Unemployment
Practice Questions
Cyclical Unemployment
Practice Questions
Labor Force Participation
Practice Questions
Taxing Work
Practice Questions
Women Working: What’s the Pill Got to Do With It?
Practice Questions
Inflation and Quantity Theory of Money
Zimbabwe and Hyperinflation: Who Wants to Be a Trillionaire?
Practice Questions
Measuring Inflation
Practice Questions
Quantity Theory of Money
Practice Questions
Causes of Inflation
Practice Questions
Costs of Inflation: Price Confusion and Money Illusion
Practice Questions
Costs of Inflation: Financial Intermediation Failure
Practice Questions
Office Hours: Costs of Inflation
Practice Questions
Why Governments Create Inflation
Practice Questions
Business Fluctuations
Intro to Business Fluctuations
Practice Questions
The Aggregate Demand Curve
Practice Questions
The Long-Run Aggregate Supply Curve
Practice Questions
Sticky Wages
Practice Questions
The Short-Run Aggregate Supply Curve
Practice Questions
Changes in Velocity
Practice Questions
Understanding the Great Depression
Practice Questions
Office Hours: Using the AD-AS Model
Practice Questions
Office Hours: Multiple Shocks with the AD-AS Model
Practice Questions
Business Cycle Theories
Game of Theories: The Keynesians
Practice Questions
Game of Theories: The Monetarists
Practice Questions
Game of Theories: Real Business Cycle
Practice Questions
Game of Theories: The Austrians
Practice Questions
Game of Theories: The Great Recession
Practice Questions
Monetary Policy and the Federal Reserve
Monetary Policy and the Fed
Practice Questions
The U.S. Money Supplies
Practice Questions
The Money Multiplier
Practice Questions
How the Fed Worked: Before the Great Recession
Practice Questions
How the Fed Works: After the Great Recession
Practice Questions
The Federal Reserve as Lender of Last Resort
Practice Questions
Monetary Policy: The Best Case Scenario
Practice Questions
Monetary Policy: The Negative Real Shock Dilemma
Practice Questions
When the Fed Does Too Much
Practice Questions
Fiscal Policy
Introduction to Fiscal Policy
Practice Questions
Fiscal Policy: The Best Case Scenario
Practice Questions
The Limits of Fiscal Policy
Practice Questions
The Dangers of Fiscal Policy
Practice Questions
Fiscal Policy and Crowding Out
Practice Questions
Exam
Principles of Economics: Macroeconomics