In a two-period model with default, if the market interest rate ...

[Brittanyd9008]

In a two-period model with default, if the market interest rate is low, then
 
  A) default is more likely
  B) there is no effect on the nation's default decision.
  C) default is less likely.
  D) the income effect is larger than the substitution effect.

Question 2

The MP curve may be used to represent how ________.
 
  A) movements of the inflation rate are determined by the real interest rate
  B) monetary policy responds to changes in the real interest rate
  C) movements of the real interest rate are related to the inflation rate
  D) all of the above
  E) none of the above

[cdmart10]

Answer to Question 1

C

Answer to Question 2

C