Q1. A nation demand for loan is r= 20- (0.5)i where r is the nominal interest rate. the supply of loans is r=2+i. if the real interest rate is equal to 3%, then what is the expected rate of inflation in the nation?
Q2. A firm with a U-shaped average cost curve finds that its costs exceed its revenues when it sets price equal to marginal cost. On which part of its average cost curve is the firm operating?
Q3. Suppose a third project will cost $20,000 today and yield a return of $2,500 a year indefinitely. What is the present value of the project? What is the present value if the interest rate increases to 20 percent?